* Surprise drop in weekly crude stocks lifts WTI
* Mid-East tensions, tight output support Brent crude
* Eyes on EIA inventory data due later
* Coming Up: Jan housing starts, PPI, FOMC minutes
(Updates with prices, analyst quote)
By Jennifer Tan
SINGAPORE, Feb 16 (Reuters) - U.S. oil prices recovered to
nearly $85 a barrel on Wednesday, lifted by an unexpected fall
in weekly crude stocks, while London Brent rose to near $102,
underpinned by protests in the Middle East.
Traders will scour the Energy Information Administration's
(EIA) report, to be unveiled later, for confirmation of the
decline in U.S. weekly crude inventories as seen in the data
from the American Petroleum Institute (API) on Tuesday.
A slew of data, including U.S. January housing starts and
Producer Price Index (PPI), together with minutes from the last
Federal Open Market Committee (FOMC) meeting, due later, will
shed more light on the health of the world's top energy user.
"All eyes will be on the EIA inventory data coming out
later, to see if it confirms the decline in the API data. There
are still expectations for a build in weekly crude stocks," said
Tony Nunan, a risk manager with Tokyo-based Mitsubishi Corp.
"Cushing stocks are the key factor in blowing out the spread
between WTI and Brent, and it looks like this gap will persist
for several more months, at least until the summer driving
season, when demand picks up," he added.
U.S. crude for March delivery gained 22 cents to
$84.54 a barrel by 0536 GMT, after settling 49 cents weaker at
$84.32 a barrel.
Brent crude for April delivery rose 27 cents to
$101.91 a barrel, after settling $1.44 lower at $101.64 in the
previous session. Prices had hit a 29-month peak of $104.30 on
Monday.
The spread between the two grades <CL-LCO1=R> was just above
$14, after hitting a record of $16.27 a barrel last week.
"We are near the bottom for WTI -- it should hold around the
mid-$80s, while Brent could close the gap a bit by easing to the
high-$90s over the next week or so," Nunan added.
A bullish target at $105.80 a barrel is aborted for Brent
and a bearish target has been established at $100.42, Reuters
technical analyst Wang Tao said.
For a 24-hour technical outlook on oil, click:
http://graphics.thomsonreuters.com/WT/20111602093253.jpg
U.S. crude stocks fell by 354,000 barrels last week as
imports dropped, the API said. Analysts polled by Reuters had
expected a 2.2 million-barrel rise in crude stocks. The EIA will
issue its report at 10:30 a.m. EST.
MIDDLE EAST VOLATILE
In the Middle East, protests in Bahrain, Iran and Yemen
after Egyptian President Hosni Mubarak's resignation last week
continued to support Brent crude prices.
Shi'ite protesters prepared to camp out in Bahrain's capital
on Tuesday, after a day of protests in which a man was shot dead
in clashes with police at a funeral for a demonstrator shot the
day before.
Hundreds of anti-government protesters and government
loyalists fought with rocks and batons in Sanaa, the Yemeni
capital, in political unrest fueled by the Egyptian
uprising.
Further boosting Brent crude were signs of declining
supplies. North Sea oil output will fall by 8.6 percent in March
from a year earlier, illustrating the gradual drop in supply
from the home of the Brent benchmark used to value two-thirds of
global oil, data compiled by Reuters showed.
U.S. economic data due for release later could reinforce
signs of an anaemic recovery in the world's largest economy.
The Commerce Department will release housing starts and
permits for January at 1330 GMT, while the Labor Department will
unveil the January Producer Price Index. The FOMC will issue
minutes from its policy-setting meeting of Jan. 25-26 at 1900
GMT.
The dollar index , which tracks the greenback's
performance against a basket of major currencies, eased 0.2
percent to 78.418. The dollar had hit an eight-week high against
the Japanese yen overnight, after a recent string of upbeat data
fuelled gains in U.S. Treasury yields.
(Editing by Ramthan Hussain)
