* Dovish Yellen testimony would assure oil markets
* U.S. crude above $100 a barrel on cold weather,
expectations of slower tapering
* U.S. distillate stocks seen falling last week
* Coming up: Fed Chair Yellen testimony to Congress at 1500
* API weekly U.S. inventory report at 2130 GMT
By Jacob Gronholt-Pedersen
SINGAPORE, Feb 11 Brent crude edged toward $109
a barrel on Tuesday on cautious optimism that the Federal
Reserve's new head will signal the central bank's
commodity-friendly monetary policy is to remain for now.
With all eyes on Janet Yellen in her first testimony to
Congress, many investors expect her to indicate slower stimulus
tapering following recent mixed data in the world's biggest
"If Yellen, as expected, gives a dovish testimony, it will
give some assurance to oil markets," said Chee Tat Tan,
investment analyst at Phillip Futures in Singapore. "The
greenback would be likely to weaken further, which would help
lift demand for crude oil."
Brent crude for March delivery was up 8 cents at
$108.71 per barrel at 0321 GMT, after settling 94 cents lower.
The contract, which expires on Thursday, traded as high as
$109.75 on Monday, its highest since Jan. 2.
U.S. crude traded 6 cent higher at $100.12 a barrel.
The contract closed above the $100-mark on Monday for the first
time this year.
The Fed has begun cutting its bond purchases by $10 billion
a month as the U.S. economy showed signs of strength. The move
marks perhaps its most difficult policy shift after five years
of easy money that has provided support for risky assets such as
The dollar wallowed near a two-week low against a basket of
major currencies early on Tuesday.
U.S. oil hovered around a six-week high, supported by an
expected drop in distillate inventories last week, in part due
to continuing freezing weather across the country.
A survey of five analysts, taken ahead of weekly inventory
reports from the American Petroleum Institute (API) and the U.S.
Energy Information Administration (EIA), forecast distillate
stocks, including heating oil and diesel fuel, fell 2.3 million
barrels in the week to Feb. 7.
However, the possibility of milder weather next week curbed
demand for heating oil in recent days and raised the prospect of
an end to a long winter, even as another snowstorm is expected
in the U.S. Northeast this week.
"Prices can hold up for now, but when temperatures return to
normal, oil may lose support and U.S. crude will again trade on
its fundamentals," said Tan.
U.S. crude oil inventories were expected to have risen by 3
million barrels last week to more than 361 million barrels, the
preliminary poll of analysts showed.
The API will release its data at 2130 GMT, while the EIA
will publish its data on Wednesday at 1530 GMT.
Crude inventories could continue to rise as U.S. oil
production from shale plays is expected to accelerate in
February and March, the EIA said.
Shale oil production will rise by 63,000 barrels per day
(bpd) in February and another 64,000 bpd in March, according to
forecasts from the EIA issued on Monday.
That compares to a 53,000 bpd increase in January and a
49,000 bpd rise in December, months that typically experience
slower activity due to winter weather conditions.
(Reporting By Jacob Gronholt-Pedersen; Editing by Ed Davies)