* "Fiscal cliff" hopes lift Asian shares, other riskier
* Seaway pipeline expansion news supports U.S. oil
* Brent to rebound to $109.02 -technicals
(Adds Ali al-Naimi's comment, updates prices)
By Manash Goswami
SINGAPORE, Dec 18 Brent crude rose above $108 a
barrel on Tuesday as the outlook for demand improved on signs of
progress in U.S. talks to resolve a budget crisis that threatens
to dip the world's top oil consumer into recession again.
Optimism that the U.S. "fiscal cliff" tussle could be
settled before tax hikes and spending cuts kick in early next
year boosted riskier assets after President Barack Obama made an
offer to Republicans that included a major change in position on
tax hikes for the wealthy.
"Oil is tracking the positive reaction in equities from New
York to Asia over hopes of a resolution of the U.S. fiscal
crisis," said Tetsu Emori, a Tokyo-based commodities fund
manager at Astmax Investment.
U.S. oil is drawing support from news of a pipeline
expansion in the United States that may help narrow the spread
between the two contracts, Emori said.
Brent crude rose 75 cents to $108.39 a barrel by
0715 GMT. U.S. oil gained 55 cents to $87.75, rising for
a third straight day on hopes the Seaway pipeline expansion may
help soak up the crude glut in the delivery hub of the futures
A resolution to the so-called U.S. fiscal cliff may help
support oil prices, which have been trapped in a range, with
Brent trading between a high of $112 and a low of $104 since
November partly because of an uncertain demand outlook.
"The market will view any advance in talks as positive for
confidence which has been battered by the daily flow of
political fighting," Ben Taylor, sales trader at CMC Markets
said in a report. "Regardless of what is decided, the market is
looking for a decision and any compromise will help provide a
clearer picture for the future."
The differences over how to resolve the "fiscal cliff"
narrowed significantly as, in its most dramatic position change
yet, the White House proposed leaving lower tax rates in place
for everyone except those earning $400,000 and above, a source
familiar with the talks said.
That's up from the $250,000 threshold the president has been
demanding for months, but still far from Republican House of
Representatives Speaker John Boehner's preference of $1 million.
The possible end to the stalemate comes as data points to a
revival in demand in China, renewing investor optimism over the
world's top two oil consumers.
"We have also seen an improvement coming from China. Their
refinery output is increasing and that is leading to higher
imports," Emori said. "That is also supporting prices."
Global oil supplies are ample and demand is good, top
exporter Saudi Arabia's oil minister Ali Al-Naimi said, adding
that both buyers and sellers are happy with current prices.
Brent is expected to rebound to $109.02 per barrel, as it
did not break a support at $107.54, while U.S. oil may break a
resistance at $87.77 and rise into a range of $88.28 to $88.37,
Reuters technical analyst Wang Tao said.
SPREAD NARROWS, SEAWAY EYED
The spread between the two contracts CL-LCO1=R narrowed by
more than $2 on Monday to about $20 per barrel on news that a
pipeline to transport crude between Cushing, Oklahoma, and
Houston, Texas, will be expanded starting next month.
Enterprise Products Partners LP and partner Enbridge
Inc said they plan to expand the 150,000 barrel per day
Seaway pipeline to 400,000 bpd by next month and to 850,000
barrels a day of crude by early 2014.
A glut of crude in Cushing has contributed to the heavy
discount of U.S. West Texas Intermediate (WTI) crude futures to
Brent which widened to more than $25 per barrel last month.
The increased capacity will allow more crude from Cushing to
the Gulf Coast, where it fetches prices closer to Brent.
Meanwhile, a drawdown of inventories by U.S. refineries for
year-end tax purposes may result in a lower reading for
stockpiles data due on Tuesday, a Reuters poll showed.
Crude stocks may have dropped by 1 million barrels in the
week ended Dec. 14, the poll showed.
(Additional reporting by Ramya Venugopal; Editing by Himani