UPDATE 5-Oil eases near $41 before inventory report

                                
 * EIA report expected to show rise in crude stocks
                                
 * Equities rally, dollar weakens
                                
 
                                
 (Updates prices)
                                
 By Alex Lawler
                                
 LONDON, Jan 28 (Reuters) - Oil eased near $41 a barrel on
Wednesday before the release of a U.S. government report
expected to show a rise in crude stocks, underscoring weak
demand in the world's top consumer.
                                
 U.S. crude stocks are likely to rise by 2.9 million barrels,
according to a Reuters poll. The U.S. Energy Information
Administration releases its report at 1530 GMT. [EIA/S]
                                
 "The market is very much range trading. We got down to the
bottom of the range yesterday, and we might get to the top of
the range today if there is something supportive in the
statistics," said Christopher Bellew, broker at Bache
Commodities.
                                
 U.S. crude <CLc1> fell 23 cents a barrel to $41.35 by 1422
GMT, after plunging 9 percent on Tuesday as bleak U.S. economic
data stirred demand concerns. London Brent <LCOc1> climbed 47
cents to $44.20.
                                
 Brent is trading at an atypical premium to U.S. crude as
high inventories pressure the U.S. benchmark and, according to
some analysts, healthier crude demand in Europe supports Brent.
                                
 Oil drew support from equities, which advanced after
reassuring corporate results on Wall Street, and a weaker U.S.
dollar. Dollar weakness can boost investor demand for oil and
commodities.
                                
 Fuel demand has weakened, especially in developed economies,
because of the global economic crisis, boosting inventories and
knocking prices down from a record high of $147.27 a barrel hit
in July.
                                
 On Tuesday, an American Petroleum Institute (API) report on
Tuesday showed crude inventories rose by 800,000 barrels.
[API/S] The EIA data is seen by traders as a more complete
snapshot of supplies.
                                
 The API has begun releasing its weekly inventory report on
Tuesday afternoons, a day ahead of the EIA.
                                
 Supply cuts by the Organization of the Petroleum Exporting
Countries (OPEC) since the second half of last year have offered
prices some support against weakening demand.
                                
 Besides the EIA report, traders were also watching for the
result of a two-day Federal Reserve meeting due out later in the
day.
                                
 Policymakers are expected to hold their target for official
borrowing costs in a range of zero to 0.25 percent.
[ID:nN27471774]
  (Additional reporting by Chua Baizhen in Singapore and Peg
Mackey in London, editing by Anthony Barker)