NYMEX-U.S. crude rises 2 percent on demand optimism - Reuters

* Oil rebounds as demand hopes rise
* Moody's cuts Portugal rating, trims gains in late trade
* Coming up: API oil data, 4:30 p.m. EDT Wednesday

NEW YORK, July 5 (Reuters) - U.S. crude oil futures rose more than 2 percent on Tuesday, bouncing back after a long holiday weekend, as commodities rose on demand optimism.

Barclays Capital raised its 2012 price forecast for Brent and U.S. crude, while Saudi Arabia reduced just slightly the price of oil it sells to Asian customers, both helping to improve sentiment.

In addition, U.S. factory orders rose in May and commodities buyers looked forward to improved oil demand for the second half of the year.

Ahead of weekly inventory data, a Reuters poll of analysts forecast that domestic crude stocks fell 2.3 million barrels in the week to July 1. [EIA/S]

Distillate stocks were forecast up 600,000 barrels while gasoline inventories were projected to have been little changed from the week to June 24.

FUNDAMENTALS

* On the New York Mercantile Exchange, crude for August delivery CLQ1 settled at $96.89 a barrel, gaining $1.95, or 2.05 percent, after trading between $94.34 and $97.48, the highest for front-month NYMEX crude since June 15.

* Late selling pared the day's gains after Moody's Investors Service cut Portugal's credit rating, causing the euro to fall against the dollar and snap six days of gains. In late trading, the dollar was up 0.55 percent against a basket
of currencies. [USD/] .DXY

* In London, ICE Brent crude for August delivery LCOQ1 settled at $113.61, gaining $2.22, or 1.99 percent, after trading between $110.45 and $114.44. The settlement and session high were the loftiest for front-month Brent since June 22.

* U.S. crude's discount to Brent widened to $16.72, from $16.51 on Monday. CL-LCO1=R

* Saudi Arabia trimmed the price for its August Arab Light crude by just 10 cents from the July level for Asian customers, who buy more than half of Saudi crude exports. The move may make it difficult for Riyadh to increase exports despite
expectations that the kingdom would pump more to meet rising demand in the second half of the year. [ID:nL6E71516K]

* Barclays Capital raised its 2012 forecast for Brent LCOc1 by $10 to $115 a barrel, and raised its 2012 forecast for U.S. light sweet crude CLc1 by $4 to $110. Barclays left its Brent forecast for 2011 at $112 but cut its 2011 forecast for U.S. crude by $6 to $100. [ID:nL6E7I50DP]

* Brent will fall to $90 a barrel by September because of the International Energy Agency's move to release oil reserves and an increase in Saudi Arabia's production, before bouncing for the longer term, Citigroup said. [ID:nL6E7I50MH]

* China's local government debt may be 3.5 trillion yuan ($540 billion) larger than auditors estimated, potentially putting banks on the hook for deeper losses that could threaten their credit ratings, Moody's said. [ID:nL3E7I507Y]

* Venezuela's energy policy is not affected by health problems suffered by President Hugo Chavez, his oil minister said on Monday. [ID:nN1E7630WX]

MARKETS NEWS

* The Dow Jones industrial average .DJI and the Standard & Poor's 500 Index .SPX fell while the Nasdaq Composite Index .IXIC rose as investors paused after last week's surge. [.N]

* Gold rose nearly 2 percent as risk-averse investors bought the precious metal on concerns about China's economic outlook and worries about the Greek debt crisis. [GOL/]

* Copper closed up for a sixth day as supply threats in Chile and upbeat U.S. data added fuel to the rally. [MET/L