UPDATE 10-U.S. oil gains as equities up, Fed supports

                                
 * Fed says recovery continuing, keeps bond-buy plan
                                
 * EIA says U.S. crude stockpiles up 4.84 mln bbls
                                
 * Brent premium to US crude exceeds $10, highest in 2 yrs
                                
 * Coming up: U.S. weekly jobless claims, Thursday
 (Recasts, updates prices, market activity to Brent
settlement)
                                
 By Gene Ramos
                                
 NEW YORK, Jan 26 (Reuters) - U.S. crude rallied above $87 a
barrel on Wednesday, gaining ground as Wall Street rose after
President Barack Obama's call for lower corporate taxes spurred
hopes for higher profits and stronger energy demand.
                                
 U.S. Federal Reserve policymakers, at the end of a two-day
meeting, said they would press on with a plan to buy $600
billion in government debt to further stimulate the economy,
The announcement by the Federal Open Market Committee (FOMC)
gave oil markets a further boost just before the close.
                                
 "The market's initial reaction to the FOMC announcement was
bullish, based on its reaffirmation of their bond purchase
program," said Jim Ritterbusch, president of Ritterbusch &
Associates in Galena, Illinois.
                                
 Investors shrugged off data showing U.S. crude oil
stockpiles jumped nearly 5 million barrels last week, more than
expected and extending supply gains for a second week. [EIA/S]
                                
 "Prices are holding and part of that may be due to the fact
that President Obama, in his State of the Union message, had
struck a generally pro-business stance," said Phil Flynn,
analyst at PFGBest Research in Chicago.
                                
 In his address to Congress on Tuesday night, Obama asked
lawmakers to work with him to cut the corporate tax rate and
simplify the tax code, moves that could boost profits.
                                
 U.S. equities gained on Obama's  pro-business proposal,
even though Fed policymakers gave a lukewarm economic
assessment, with unemployment remaining a tough issue,
justifying the bond-buying plan. [.N]
                                
 U.S. crude for March delivery <CLH1> settled $1.14 higher,
or 1.32 percent, at $87.33 a barrel, rebounding after six
straights days of losses on rising inventories as well as
worries about global economic recovery.
                                
 In London, March Brent <LCOH1> ended up $2.66, or 2.79
percent, at $97.91.
                                
 Brent crude's premium <CL-LCO1=R> against U.S. benchmark
crude, also known as West Texas Intermediate, leaped to
 $10.69, widest since January 2009, after ending at $9.21 on
Tuesday.
                                
 Brent strengthened as data from the U.S. Energy Information
Administration showed crude stockpiles at the key storage hub
in Cushing, Oklahoma, delivery point for crude traded on the
New York Mercantile Exchange, rose 862,000 barrels last week.
                                
 "Brent and WTI have been trading increasingly as entirely
separate commodities in recent weeks, driven by decidedly
different fundamentals," said J.P. Morgan analysts in a
report.
                                
 "Unsurprisingly, the main issue for the wide Brent-WTI
spread seems to lie not with Brent but rather with WTI."
                                
 COMMODIIES REBOUND
                                
 The rally in oil markets was part of an overall surge in
commodities as demand optimism resurfaced, a factor that caused
the Reuters-Jefferies CRB index <.CRB>, which tracks 19
commodities, to erase Tuesday's hefty loss.
                                
 Weekly U.S. government data showed a mixed picture for
refined fuels, with gasoline stocks rising more than expected,
by 2.4 million barrels, and distillates supplies down by
140,000 barrels, far less than forecast.
                                
 Overall, the data reflected a bigger increase in crude
stocks than the 2.1 million barrel build that industry group
American Petroleum Institute reported late Tuesday. [API/S]
                                
 But a big disparity developed in distillates, as the API
reported a whopping 5.0 million barrel slide in that category.
                                
 Brent and U.S. crude hit more than two-year highs earlier
this month, Brent trading just 80 cents shy of the $100 a
barrel milestone on Jan. 14. U.S. crude a high of $92.58 on the
first trading day of the year.
                                
 The immediate risk of a breach of $100 had now receded with
prices likely to trend lower through the first quarter, said
analysts at Credit Agricole CIB and Facts Global Energy.
 (Additional reporting by Robert Gibbbons in New York; Alex
Lawler and Emma Farge in London; Florence Tan in Singapore;
editing by Marguerita Choy and David Gregorio)