Oil Gains On OPEC Production Cut Talk, Libya Paring Output

NEW YORK, Sept 16 (Reuters) - U.S. crude futures rose by almost $2 and Brent by more than $1 on Tuesday on the prospect of a production cut by OPEC as well as on a weakening dollar and news that Libya had curbed output after rockets hit an area near a refinery.

The dollar began selling off just ahead of a meeting of the U.S. Federal Reserve, sending the euro to a near two-week high against the U.S. currency, and boosting both Brent and U.S. crude, brokers said.

A weakening dollar makes it cheaper for holders of other currencies to purchase crude oil contracts priced in dollars.

"The weakening dollar is supporting both benchmarks," said John Kilduff, a partner at Again Capital LLC.

November Brent rose $1.17 to settle at $99.05 a barrel. The October contract expired and went off the board on Monday at $96.21.

Brent is down 11 percent in the third quarter, its biggest quarterly drop since the second quarter of 2012. It fell to a 26-month low on Monday, tumbling from above $115 in June because of supply increases and sluggish growth in demand.

The front-month U.S. October crude settled $1.96 higher at $94.88 a barrel, after earlier touching a high of $95.15. The October contract expires on Sept. 22.