* U.S. housing market logs biggest yearly gain since 2006
* Investors await Fed policy meeting outcome, U.S. Q4 GDP
* China Jan PMI forecast at 50.9 vs Dec 50.6 -Reuters poll
* Coming Up: EIA weekly inventory report; 1530 GMT
By Jessica Jaganathan
SINGAPORE, Jan 30 Brent prices held above $114 a
barrel on Wednesday on optimism about the U.S. economy after a
string of data out of the world's largest oil consumer showed a
recovery was gaining ground.
Still, investors are cautious about making big bets ahead of
a two-day Federal Reserve policy meeting and first estimates for
fourth-quarter U.S. gross domestic product due later in the day.
Brent crude edged up 2 cents to $114.38 a barrel by
0235 GMT, after reaching a more than three-month high in the
U.S. crude was down 2 cents to $97.55, after gaining
nearly 1.2 percent in the previous session.
"There are bullish reasons to see oil prices rise and our
view is that this week we will continue to see
better-than-expected U.S. data, which should move oil in the
same direction," Jeremy Friesen, a commodities strategist at
Societe Generale in Hong Kong, said.
"But we do think the supply side is probably enough and
ultimately should cap oil prices in the second quarter."
Investor sentiment got a boost after U.S. home prices rose
in November, climbing more than five percent from a year ago, in
the biggest increase since August 2006, when the housing market
was starting to collapse.
But the focus is now on the Fed's monetary policy committee,
which started its two-day meeting on Tuesday. The Fed has said
it expects to keep short-term U.S. interest rates exceptionally
low to help support the economy.
The low rates have helped push up oil prices, as investors
pour cash into riskier asset classes.
The short-term oil outlook was also buoyed by optimism of
growth acceleration in China.
China's factory activity in January probably expanded at its
fastest pace in nine months, according to a Reuters poll ahead
of official PMI data on Friday, adding to signs that recovery
momentum is building as domestic demand strengthens.
Analysts say Chinese factories are approaching the end of a
destocking cycle, which is usually followed by a rebuilding of
inventories that will raise industrial output in 2013.
German consumer morale rose for the first time in four
months while French consumer confidence held steady in January
as fears of job losses eased, fuelling hopes demand will prop up
growth in these countries.
The rebound in China's growth is expected to continue until
the second quarter before fading in the second half, though an
economy rebound elsewhere towards year-end will likely sustain
(global) growth rates for the whole year, Friesen said.
"We do think U.S. and European growth statistics will pick
up at end of the year. The main driver of this optimism
near-term has been China but we don't think it'll last the whole
year," he added.
"That's generally positive for the commodity space but for
the oil market in particular, oil supply is probably enough to
cap that, barring any sudden supply risks."
Supply risks from the Middle East capped oil price gains
after at least 65 people were found shot dead with hands bound
in the northern Syrian city of Aleppo on Tuesday in a "new
massacre" in the near two-year revolt against President Bashar
al-Assad, activists said.
U.S. OIL INVENTORIES
U.S. crude stocks rose 4.2 million barrels last week, the
American Petroleum Institute (API) reported on Tuesday.
Crude stocks at Cushing fell 15,000 barrels, according to
the API, while gasoline stocks rose 2.4 million barrels and
distillate stocks fell 1.8 million barrels, the API said.
Analysts had expected U.S. crude stocks to rise 2.6 million
barrels, according to a Reuters survey ahead of weekly inventory
reports from the API and the U.S. government's Energy
Information Administration (EIA).
The EIA weekly inventory report is due on Wednesday at 10:30
a.m. EST (1530 GMT).
(Editing by Clarence Fernandez)