Brent above $108 on hopes of US budget crisis resolution

Tue Dec 18, 2012 9:37pm EST

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* U.S. crude stocks drop, oil products mixed last week -API

* Global shares, euro rally on hopes for U.S. budget deal

* Brent approaching resistance at $109.02/bbl - technicals

* Coming up: EIA weekly oil inventories at 1530 GMT

By Manash Goswami and Florence Tan

SINGAPORE Dec 19 (Reuters) - Brent futures held steady above $108 a barrel on Wednesday, tracking a rally in most other risk assets on expectations a budget crisis in the United States will be resolved, saving the world's top oil consumer from slipping into recession.

Asian shares rose, following a rally in U.S. equities, and the euro hovered around multi-month highs on growing investor confidence of an agreement on spending and taxes between the White House and Republicans before the year-end deadline. Oil may get additional support if U.S. inventory data is close to that of an industry group that showed a sharp drawdown.

Brent crude slipped 1 cent to $108.83 a barrel by 0150 GMT, after settling $1.20 higher. U.S. oil slipped 2 cents to $87.91, after ending 73 cents higher and breaking above the 50-day moving average of $87.64.

"There is more upside potential for Brent because of a revival in the overall economic outlook," said Yusuke Seta, a commodities sales manager at Newedge Japan.

"Supporting factors are prevailing over negative factors."

Political manoeuvring intensified over an agreement to keep the U.S. economy from tumbling off the "fiscal cliff" next year as Republicans tried to wring more tax-rate concessions out of the White House on Tuesday.

Brent is approaching a resistance at $109.02 per barrel, according to Reuters technical analyst Wang Tao. U.S. oil faces a resistance zone of $88.28-$88.37 and is expected to retrace to $86.80, he said.

Data from the American Petroleum Institute showed U.S. crude stocks fell more than expected in the week to Dec. 14 as imports dropped and refined product stocks were mixed as processing rates rose.

Crude stocks fell by 4.1 million barrels against a forecast 1.1 million barrel drawdown in a Reuters poll. Gasoline stockpiles across the country rose by 4.2 million barrels last week compared with an expectation of a 1.8 million barrel build. Investors are now awaiting inventory data due later in the day from the Energy Information Administration (EIA).

"Oil may get additional support if the U.S. government data on stockpiles confirm what the industry data API has said," Newedge's Seta said. (Reporting by Manash Goswami; Editing by Ed Davies)

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