* Asian shares pinned near 5-month lows on emerging markets turmoil
* U.S. crude inventories seen up, distillates down -poll
* OPEC can adjust output to any return of Libya, Iraq output -secgen
* Coming Up: API weekly US crude stocks data; 2130 GMT
By Manash Goswami
SINGAPORE, Jan 28 (Reuters) - Brent futures rose to $107 a barrel on Tuesday as the steepest fall in three weeks prompted fresh buying, with concerns of turmoil in emerging economies and a slowdown in China keeping the gains in check.
Oil also drew support from expectations of a steep fall in U.S. distillate inventories, which would indicate ongoing robust demand for heating oil because of bitter winter cold in northern countries. That helped crude futures diverge from other assets such as Asian shares, which remained near five-months lows.
Brent crude touched a high of $107.10 a barrel and was up 29 cents at $106.98 by 0329 GMT. Brent fell $1.19 in the previous session, its biggest decline since Jan. 2.
U.S. oil gained 12 cents to $95.84, after sliding the most since Jan. 13.
“The recovery in oil is a knee-jerk reaction to the steep fall in prices we saw overnight,” said Jonathan Barratt, chief executive of commodity research firm Barratt’s Bulletin in Sydney. “The outlook is weak as some of the numbers out there, particularly from China, are a bit of a concern.”
A forecast fall in distillate inventories is overshadowing the rise in crude stockpiles for the second straight week in the world’s top oil consumer.
A Reuters survey of analysts, taken ahead of weekly inventory reports from the American Petroleum Institute (API) and the U.S. Energy Information Administration (EIA), showed distillate stocks, including heating oil and diesel fuel, decreased 2.4 million barrels on average.
U.S. crude may have risen about 2.7 million barrels in the week ended Jan. 24, gaining for a second week as inventories rose 990,000 barrels last week, the survey indicated.
Oil is expected to trade in a narrow range, with a bearish outlook, over the next two days as markets await the outcome of the U.S. Federal Reserve policy meet, where the central bank is expected to scale back its monthly bond buying further.
A rollback will support the dollar, weighing on commodities that are priced in the currency.
Investors are also watching any possibility of a rise in global oil supplies, although the producer group OPEC has said it would able to head off any surplus.
Top exporter Saudi Arabia along with core Gulf producers the United Arab Emirates and Kuwait have increased supplies to fill the gap left by outages in Libya and Iraq and due to Western sanctions on Iran.
But a resolution of these issues could add at least 2 million barrels per day (bpd) to OPEC oil production, analysts say, potentially driving down oil prices unless the other member countries cut back on production.
“When they come, we will accommodate them, and OPEC will be as before,” OPEC Secretary General Abdullah al-Badri said at a briefing with reporters at a London conference. “We’ve faced a lot of difficulties in the past, and we were able to overcome them, and this we will overcome.” (Reporting by Manash Goswami; Editing by Tom Hogue)