UPDATE 1-Oil gains on China manufacturing; Europe worries linger

                                
 * China manufacturing PMI rises to seven-month high
                                
 * Technicals show oil may drop towards $83 [ID:nL3E6N101R]
                                
 * Coming Up: US EIA oil inventory report; 1530 GMT

 (Recasts with price gain, updates prices)	
                                
 By Alejandro Barbajosa	
                                
 SINGAPORE, Dec 1 (Reuters) - Oil rose on Wednesday on data 
showing factories in China revved up output in November, while 
Europe's debt problems and signs of rising U.S. fuel 
inventories capped gains.	
                                
 China's official purchasing managers' index (PMI) climbed 
to a seven-month high in November, but rising input prices 
also signalled a need to tighten monetary policy to curb 
inflation, a move that would cut energy demand from the 
world's second-largest oil user. [ID:nTOE6B001C]	
                                
 U.S. crude for January <CLc1> gained 35 cents to $84.46 a 
barrel by 0612 GMT, after tumbling almost 2 percent on 
Wednesday. Prices still posted a third straight monthly gain, 
up by more than 3 percent in November, when they also touched 
a 25-month high of $88.63. ICE Brent <LCOc1> rose 33 cents to 
$86.25.	
                                
 U.S. crude inventories fell by 1.1 million barrels in the 
week through Nov. 26, the American Petroleum Institute (API) 
reported on Tuesday, compared with expectations for a 
900,000-barrel decline.	
                                
 A drawdown of a bigger magnitude than that reported by the 
API "would bring oil inventories closer to their five-year 
average, which might provide the market with a positive 
impulse," said Stefan Graber, a commodities analyst with 
Credit Suisse in Singapore.	
                                
 Inventories of distillates including heating oil and 
diesel unexpectedly rose by 224,000 barrels last week in top 
consumer the United States, according to the API. 
                                
 Should the increase be confirmed in a government report 
from the Energy Information Administration (EIA) due on 
Wednesday at 1530 GMT, that would end a streak of nine 
consecutive weekly drops. The average forecasts from a Reuters 
poll of analysts is for a decline of 1.1 million barrels.	
                                
 And gasoline stockpiles rose 1.1 million barrels last week 
according to the API, almost three times the projected 
400,000-barrel gain. 	
                                
 U.S. consumer confidence rose in November to its highest 
in five months and U.S. Midwest business activity grew faster 
than expected, providing further evidence of economic recovery. 	
                                
 Still, a faster-than-expected fall in prices of U.S. 
single-family homes in September underscored the hurdles 
remaining for the recovery. [ID:nN30263756]	
                                
 The euro continued to struggle across the board on 
Wednesday, stuck near 11-week lows against the dollar as the 
market waited to see what European policymakers would do next 
to try to contain worries about euro zone debt. 
                                
 A day earlier, the single currency suffered yet another 
setback as Standard & Poor's threatened to cut the credit 
ratings of Portugal.	
                                
 S&P's warning came after Ireland on Sunday secured an 
85-billion-euro bailout package from the European Union and 
International Monetary Fund, seven months after Greece was 
thrown a lifeline to tackle its debt problems.	
	
 (Reporting by Alejandro Barbajosa; Editing by Himani Sarkar)