* OPEC seen keeping output targets steady at Wednesday talks
* Stock market rally, weaker dollar help lifts prices
* Coming Up: Fed benchmark rate decision at 1815 GMT
* Coming Up: American Petroleum Institute report at 2030 GMT
(Updates prices, recasts)
By Emma Farge
LONDON, March 16 (Reuters) - Oil rose above $80 a barrel on
Tuesday as equities rallied but gains were capped by caution
ahead of an OPEC meeting and expected monetary policy moves from
the world's top two oil consumers, the United States and China.
U.S. crude prices for April <CLc1> rose $1.14 to $80.94 a
barrel by 1315 GMT, after earlier touching a low of $79.32 a
barrel. ICE Brent futures <LC0c1> rose $1.02 to $78.91.
Rallying world stocks helped boost oil on Tuesday and they
climbed by 0.3 percent on Tuesday, with the pan-European
FTSEurofirst 300 <> gaining 0.7 percent. []
A dip in the dollar also supported oil, making it cheaper
for non-dollar buyers. []
"Equities are up and they do seem to be closely linked to
oil at the moment," said oil trader Tony Machacek at Bache
Financial, adding expectations for further falls in crude and
oil products held in storage are also supporting prices.
Oil prices slid nearly 2 percent on Monday, falling below
$80 a barrel for the first time since March 4 on fears that a
16-month high in consumer inflation in China might lead to
further tightening as early as this week.
China has already tightened reserve requirements twice ithis
year, with each move hitting commodity markets worried about
demand growth.
The U.S. Federal Reserve is expected to maintain interest
rates near zero and pledge to keep rates low for an extended
period later today, in a move that could boost long-term demand
prospects.
But, for some, positive comments from the Fed could boost
the dollar and weigh on oil.
"Tuesday may shape up to be another down day for energy,
since participants may not want to get too long ahead of the Fed
announcement later in the day," said MF Global analyst Edward
Meir.
SUPPLY OUTLOOK
OPEC is expected to keep output unchanged in its Wednesday
meeting in Vienna, with Saudi Arabia's oil minister saying the
producers' group may not need to adjust output policy this year
if the oil market remains stable. []
"The market is in balance, the price is great, inventories
are coming down so why should we do anything?" Ali al-Naimi said
on Monday, echoing comments from OPEC members Iran and Qatar.
The oil market is getting tighter, Saudi Oil Minister Ali
al-Naimi said on Tuesday and this also helped lift sentiment
during the day. []
"We have been sailing very well and will continue to sail
very well," Naimi, minister for the world's top oil producer
told reporters a day ahead of the Vienna meeting on Wednesday.
A report from the American Petroleum Institute due at 2030
GMT on Tuesday will provide an update on U.S. inventories and is
expected to show that crude stocks rose for the seventh straight
session last week.
The average forecast showed a 900,000 barrel increase in
crude supplies, according to a preliminary Reuters poll of
analysts. []
Weekly U.S. chain store sales due at 1145 GMT and U.S.
retail sales at 1255 GMT could also steer the market later on
Tuesday, analysts said.
The threat of future attacks on the oil industry in Nigeria
may be supporting oil after militants detonated two car bombs
outside a government building on Monday. []
(Additional reporting by Michael Urquhart in Singapore; editing
by James Jukwey)
