Brent rises above $108 on hopes US will resolve budget crisis
* Asian shares inch higher, track overnight gains in US stocks
* Hopes revive on deal between Obama, Republicans on US taxes
* Brent to rebound to $109.02 -technicals
By Manash Goswami
SINGAPORE, Dec 18 (Reuters) - Brent crude rose above $108 a barrel on Tuesday, on expectations of a revival in demand growth as the United States made progress in talks to resolve a budget crisis that threatens to dip the world's top oil consumer into recession again.
President Barack Obama made an offer to Republicans that included a major change in position on tax hikes for the wealthy, giving investors hope the weeks-long stalemate may be ending. Asian shares tracked the overnight gains in U.S. stocks, while base metals and other risk assets also rose on optimism over a deal before the year-end deadline.
Brent crude rose 59 cents to $108.23 a barrel by 0333 GMT, reversing most of the previous session's losses. U.S. oil increased 50 cents to $87.70, gaining for a third straight day, as a key pipeline expansion may help soak up the glut of crude in the delivery hub of the futures contract.
"Oil is tracking the positive reaction in equities from New York to Asia over hopes of a resolution of the U.S. fiscal crisis," said Tetsu Emori, a Tokyo-based commodities fund manager at Astmax Investment. "The news of an expansion in the pipeline capacity in the United States may help narrow the spread between the two contracts."
In its most dramatic position change yet, the White House proposed leaving lower tax rates in place for everyone except those earning $400,000 and above, a source familiar with the talks said. That's up from the $250,000 threshold the president has been demanding for months, but still far from Republican House of Representatives Speaker John Boehner's preference of $1 million.
"The market will view any advance in talks as positive for confidence which has been battered by the daily flow of political fighting," Ben Taylor, sales trader at CMC Markets said in a report. "Regardless of what is decided, the market is looking for a decision and any compromise will help provide a clearer picture for the future."
A resolution to the so-called "fiscal cliff" may help support oil prices, which have been capped, with Brent trading between a high of $112 and a low of $104 since November, in part because of an uncertain demand outlook.
The possible end to the stalemate comes as data points to a revival in demand in China, renewing investor optimism over two of the world's top oil consumers.
"We have also seen an improvement coming from China. Their refinery output is increasing and that is leading to higher imports," Emori said. "That is also supporting prices."
Brent is expected to rebound to $109.02 per barrel, as it did not break a support at $107.54, while U.S. oil may break a resistance at $87.77 and rise into a range of $88.28 to $88.37, Reuters technical analyst Wang Tao said.
Enterprise Products Partners LP and partner Enbridge Inc plan to expand the Seaway pipeline to transport 850,000 barrels a day of crude between Oklahoma and southern Texas during the first quarter of 2014.
Seaway, a 150,000 barrel per day line that was reversed earlier this year to ship crude 500 miles southward from Cushing, Oklahoma, to Houston, Texas, will be expanded to run 400,000 bpd as of next month. (Reporting by Manash Goswami; Editing by Clarence Fernandez)
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