NEW YORK (Reuters) - Oil prices rose more than a dollar on Wednesday on expectations of tight fuel inventories heading into the Northern Hemisphere winter and news of a fire at BP Plc's oil field in Alaska.

U.S. crude jumped $1.04 to $81.30 a barrel by 2:30 p.m. EDT, after gaining more than $1.24 on Tuesday. London Brent crude rose $1.11 to $78.60.

Dealers said the gains were tied to lingering worries that global oil inventories would tighten up when cold weather boosts heating fuel demand in the coming months.

Europe's oil inventories declined in September, industry monitor Euroilstock said on Tuesday, while forecasts for colder weather this year in the United States has led to expectations of higher demand for heating oil.

The crude oil market also got a boost after British oil company BP (BP.L: Quote, Profile, Research) said a fire at its giant Prudhoe Bay oil field in Alaska forced it to cut 30,000 barrels of daily production for two weeks.

The blaze came after BP was criticized for three separate fires at its Alaska North Slope operations in August.

Oil prices have been holding around the $80 mark since striking a record $83.90 in mid-September.

The Organization of the Petroleum Exporting Countries agreed last month to increase production by 500,000 barrels per day, effective November 1, but energy analysts have said the boost would do little to avert a supply squeeze.

Goldman Sachs said Wednesday there were few signs yet of the increased OPEC output and predicted inventories could be at historically low levels by the end of the year.

"Little of this oil will likely arrive in consuming regions before the end of the year," the bank said. "As a result, we expect a rare counter-seasonal drawdown in OECD oil inventories during 3Q 2007."

Tensions between Turkey and Iraq also helped lift crude, dealers said. Turkish Prime Minister Tayyip Erdogan confirmed Wednesday his government was drawing up plans to authorize a strike on Kurdish rebels.

The weak dollar, which has also helped drive oil and other commodities higher, slipped again on Wednesday, pressured by expectations the U.S. Federal Reserve will have to cut interest rates again this year to help revive the U.S. economy.

U.S. weekly oil inventory data, due on Thursday, were expected to show a 900,000-barrel increase in crude stocks, a 400,000-barrel decline in distillates -- including heating fuel -- and a 100,000-barrel rise in gasoline.