* IEA says consumption to increase by 1.3 mln bpd in 2014
* West, Iran activate nuclear deal
* U.S. stock market weighs on oil
* Coming up: API oil inventory 4:30 p.m. on Wednesday
(Updates with settlement prices, adds poll data, adds analyst's
By Elizabeth Dilts
NEW YORK, Jan 21 Oil prices clung to modest
gains on Tuesday after a swift early rally fuelled by a bullish
global demand forecast and new concerns over Libyan oil exports
succumbed to profit-taking.
A sharp mid-afternoon retreat in U.S. ultra low-sulfur
diesel futures (ULSD), which had rallied by as much as 5
percent last week, also helped pare oil's gains, even as
snowstorms blanketed the U.S. East Coast.
Volatile U.S. stock market trading and a poll showing
analysts are predicting a rise in crude oil inventories for the
first time in eight weeks added to the pull-back.
Prices kicked higher earlier Tuesday after the International
Energy Agency (IEA) said that world oil consumption would rise
by 1.3 million barrels per day (bpd) in 2014, more quickly than
"The main feature today is the support from the IEA report
we saw this morning," said Dominick Chirichella, senior partner
at Energy Management Institute.
Brent crude settled 38 cents higher at $106.73 a
barrel after rising earlier in the session to $108 per barrel.
Front-month U.S. February crude, which expired at the
close of trade, ended 62 cents higher at $94.99. U.S. crude oil
for March delivery, which will become the front-month
contract Wednesday, rose 37 cents to $94.97.
There was no settlement on Monday on the New York Mercantile
Exchange due to a U.S. holiday.
The Brent-WTI spread CL-LCO1=R, which traded as tight as
$11.16 on Friday, widened to settle at $11.76.
ULSD settled 0.1 percent lower at $3.0147 a gallon, after
racing as high as $3.0834 a barrel in advance of the snowstorm
and cold front that could boost heating fuel demand.
"Heating oil was overbought and fell back on some of its
profit-taking," said Addison Armstrong, director of market
research at Tradition Energy in Stamford, Connecticut.
STOCK BUILD SEEN
U.S. equities mostly rose Tuesday in volatile trading that
ended with the S&P 500 on pace to snap a two-session decline
thanks to a material stocks rally, though the Dow fell on
disappointing earnings by three of its components.
Analysts in a Reuters poll taken ahead of Wednesday's
American Petroleum Institute inventory report predicted gasoline
stocks increased 1.6 million barrels last week. However, the
same analysts forecast a 400,000 barrel draw on distillates,
including heating oil and diesel.
Weekly oil inventory data will be released a day late due to
the Monday holiday. The API will release its data at 4:30 p.m.
EST (2130 GMT) on Wednesday. The U.S. Energy Information
Administration will release its data at 11 a.m. EST (1600 GMT)
Brent was also boosted by news from Libya that five
officials, including the oil minister, resigned, citing the
prime minister's inability to "provide security...in the
electricity and oil sectors,"
The announcement came after Libyan prime minister vowed on
Sunday to recover important oil ports from protesters who have
controlled them since summer.
Oil received more support from an increase in risk appetite
across the market after the People's Bank of China dumped more
than 255 billion yuan ($42 billion) into the financial system,
easing concerns about a credit crunch that could hamper growth
in the world's second-biggest economy.
Uncertainty in South Sudan also supported Brent as
insurgents disputed the South Sudan president's claim that his
soldiers retook the capital of the oil-rich Upper Nile region.
Iran meanwhile agreed to a preliminary deal that stops its
nuclear operations, raising prospects the OPEC member will
eventually increase oil exports, which curbed gains in Brent
(Additional reporting by Simon Falush in London and Manash
Goswami in Singapore; Editing by Anthony Barker, Peter Galloway
and Meredith Mazzilli)