* U.S. crude stocks fell 1.8 million barrels last week -API
* U.S. dollar near eight-week low against euro
* Increased risk of Ukraine civil war supports oil prices
* Coming up: EIA weekly inventory data due 1430 GMT
By Jacob Gronholt-Pedersen
SINGAPORE, May 7 Brent crude edged higher above
$107 per barrel on Wednesday after an industry report showed
U.S. crude stocks declined last week, while increasing
geopolitical risks in Ukraine helped put a floor under prices.
Crude inventories in the United States fell by 1.8 million
barrels last week, industry group American Petroleum Institute
(API) said, going against analysts' expectations for a
1.4-million-barrel gain. Stocks at the Cushing, Oklahoma,
delivery hub fell by 1.5 million barrels, the API said.
Investors now await confirmation of the API numbers from the
U.S. Department of Energy's Energy Information Administration,
which releases its more closely watched data later on Wednesday.
Brent crude rose 26 cents to $107.32 a barrel by
0352 GMT, after ending the previous session 66 cents lower. U.S.
crude gained 60 cents to $100.10 after the contract had
settled 2 cents higher.
"A drop in inventories would put a floor under the recent
weakness and would be a welcome relief for the bulls," said
Michael McCarthy, chief strategist at CMC Markets in Sydney.
"I think most traders will be waiting for the official
numbers tonight, but it's quite clear production is running well
ahead of demand at the moment," he said.
The U.S. dollar fell to around an eight-week low
against the euro, another bullish factor for U.S. oil and other
commodities priced in the dollar as a weak greenback makes them
cheaper in terms of other currencies.
Positive economic data also lent support, with the U.S.
trade deficit narrowing in March as exports rebounded to the
second-highest level on record, indicating healthy demand for
energy in the world's biggest oil consumer.
RISK OF CIVIL WAR
Heightening tensions in Ukraine and the possibility of the
country slipping into civil war also helped lift oil markets, as
traders weighed the risk of supply disruptions from Russia, the
world's biggest oil producer.
Peace efforts in Ukraine seemed less likely with both sides
in the conflict burying their dead as the country slides towards
war, with supporters of Russia and of a united Ukraine accusing
each other of tearing the country apart.
"Risks are to the upside for Brent in the next 24 to 48
hours, as we have a very strong support level around the
$106.50-mark," said McCarthy.
"A significant troop movement on or over Ukraine's eastern
border or indication that any other country is joining the
conflict could spark a move to $109.50 to $110, although I don't
expect a jump like that in one session," he said.
The Obama administration is working on new sanctions to
impose on Russia if it ramps up aggression against Ukraine, such
as preventing elections from taking place in much of the country
or recognising another separatist referendum, U.S. officials
said on Tuesday.
(Reporting By Jacob Gronholt-Pedersen; Editing by Tom Hogue)