* Rising hopes U.S. budget crisis can be averted supports
* Israel ready for Gaza invasion, but prefers diplomacy
* Moody's downgrades France's sovereign rating
* Coming up: API U.S. oil inventory data
By Jessica Jaganathan
SINGAPORE, Nov 20 Brent crude held steady above
$111 a barrel on Tuesday, less than a dollar away from a
one-month top hit in the previous session, on hopes a U.S.
budget crisis will be averted and on supply worries triggered by
tensions in the Middle East.
Global stock markets and commodities rallied on Monday,
boosted by expectations U.S. lawmakers will reach a deal to
avert $600 billion in tax increases and spending cuts due to
start in January - the "fiscal cliff" that threatens to send the
U.S. economy back into recession.
Oil prices found additional support from the growing
Brent crude edged down 11 cents to $111.59 per
barrel by 0351 GMT, 61 cents away from previous session's
one-month top of $112.20. U.S. crude fell 21 cents to
"The overnight rally in the U.S. equity market is still
supporting the oil market with ongoing tensions in the Gaza
Strip posing some geopolitical risks," said Natalie Rampono, a
commodity strategist at ANZ.
"Even though the violence is not near oil producing nations,
the consensus is that it could lead to tensions in the region
... so I'm surprised that prices haven't rallied like they did
in the past."
Big armoured bulldozers with blades tall enough to plough
through houses and carve a path for tanks and infantry were
lined up on Israel's border with Gaza on Monday, ready to invade
if given the order.
Investors are waiting to find out if it will be truce or
war. Mediator Egypt says a deal to end the fighting could be
close. Israel says it is prepared to move troops into Gaza but
prefers a diplomatic solution.
Optimism that debt-laden Greece will get more funding also
helped brighten the outlook for oil demand, but price gains were
checked as the euro fell after Moody's stripped France of its
prized triple-A rating.
A stronger dollar makes commodities priced in the greenback
less appealing to holders of other currencies.
"While there was not much news to trigger the rally, there
are a lot of nervous investors who are underweight equities and
other risk assets," Ric Spooner, chief market analyst at CMC
Markets said in a note on Tuesday, referring to Monday's rally.
"Investors in this situation are very conscious of the
positive event risk represented by a good outcome on the fiscal
situation and the Greek government being successfully funded. In
this situation, rising prices themselves attract investors
nervous about missing out on a major rally."
Euro zone finance ministers will give a tentative go-ahead
for the disbursement of 44 billion euros in emergency loans to
Greece on Tuesday, but the money will only be paid on Dec. 5 if
the country meets all remaining conditions.
Promising data from the United States, the world's top oil
consumer, also helped keep oil prices near the peak reached in
the previous session.
U.S. home resales rose in October and a gauge of homebuilder
sentiment climbed to a six-year high in November, signs of
surprising vigour in the country's still-struggling housing
Traders are now eyeing U.S. oil inventory data. A Reuters
poll of analysts showed U.S. crude oil stockpiles were expected
to have risen by 900,000 barrels in the week to Nov. 16.
(Editing by Himani Sarkar)