UPDATE 7-Oil nears $75 as S&P 500 hits 4-month peak

                                
 * S&P 500, Wall St. rally help lift oil
                                
 * U.S. crude inventories seen hit by pipeline snag
                                
 * Coming up: API oil data, 4:30 p.m. EDT Tuesday
 (Updates prices, adds details, Reuters weekly EIA poll) 
                                
 By Robert Gibbons and David Sheppard
                                
 NEW YORK, Sept 20 (Reuters) - Oil rose by almost 2 percent
on Monday toward $75 a barrel, snapping a four-day slump,
tracking broad gains in equity markets that were buoyed by
optimism about the strength of the economic recovery.
                                
 Oil also drew strength from an expected drop in crude oil 
inventories in the United States following the outage on one of
the main pipelines delivering crude from Canada last week.
                                
 The S&P 500 <.SPX> hit a four-month high and all three
major indexes rose 1 percent as Wall Street sought to extend a
three-week rally ahead of Tuesday's monetary policy meeting by
the Federal Reserve. [.N]
                                
 "The petroleum markets are considering the upside in early
trading on Monday, encouraged by an upturn in the S&P 500," Tim
Evans, analyst at Citi Futures Perspective in New York, said in
a research note.
                                
 U.S. crude for October <CLc1> delivery rose $1.20 to settle
at $74.86 a barrel, trading from $73.32 to $75.45. The October
contract expires on Tuesday.
                                
 U.S. November crude <CLc2> closed up $1.27, or 1.7 percent,
at $76.19 a barrel. The rally had little volume behind it, with
the total number of contracts trading hands about 25 percent
below the average volume over the last 30 days, according to
Reuters data.
                                
 ICE Brent for November <LCOc1> closed up $1.10 to $79.32.
                                
 Trading sources also said crude futures were being
supported by expectations that the week-long shut down of
Enbridge Inc's <ENB.TO> Canada-to-U.S. crude oil pipeline
restarted on Friday may have pushed U.S. crude inventories
lower last week.
                                
 OIL STOCKS
                                
 A preliminary Reuters poll of 10 oil tracking analysts
showed U.S. crude stocks may have fallen last week by 1.9
million barrels because of the Enbridge outage, though traders
may be inclined to look past this week's figure given the
short-term nature of the supply disruption. [EIA/S]
                                
 Gasoline stocks are expected to have fallen by 100,000
barrels, while distillate stocks, which include heating oil and
diesel, are expected to have risen by 300,000 barrels.
                                
 An official designation of the end of the U.S. recession
also added to the optimistic sentiment, traders said.
                                
 The National Bureau of Economic Research, considered the
arbiter of U.S. recessions, said on Monday the U.S. recession
ended in June 2009, making it the longest downturn since the
Great Depression of the 1930s. [ID:nN20270054]
                                
 "The recession is declared over, sprinkling some economic
optimism and the stock market is up and oil prices are tagging
along for the ride," said Phil Flynn, analyst at PFGBest
Research in Chicago.
                                
  U.S. stocks held gains despite a survey that showed U.S.
home-builder sentiment held steady in September. It was
expected to strengthen. [ID:nN20263721]
                                
  The Fed's statement on Tuesday will be closely scrutinized
for signals on the debate about whether further large-scale
asset purchases are needed to support the recovery in the
world's top oil consumer.
                                
 The Federal Reserve is expected to renew a promise to keep
its portfolio from shrinking but is not expected to take new
steps to ease monetary policy. [ID:nSGE68J04M]
                                
 A weak dollar also was supportive to oil. A weak dollar can
lift oil prices because it makes dollar-denominated oil less
expensive for buyers using other currencies.
                                
 Oil prices shrugged off a downbeat assessment from the
Organization for Economic Cooperation and Development, which
said on Monday a U.S. recovery was under way but at such a
moderate pace that high unemployment will persist for some
time. [ID:nN20188157]
                                
 Since May, crude prices have been hemmed in between the
$64.24 intraday low on May 20, the weakest front-month price
since July 30, 2009, and the 2010 peak of $87.15 hit May 3.
Investment bank Societe Generale said rallies in crude have
been stalled than stronger than expected non-OPEC supply and
high stocks in industrialized countries. As a result the bank
cut its average price forecast for crude oil next year by $7 to
$85 at the end of last week.
 (Additional reporting by Alex Lawler in London and Alejandro
Barbajosa in Singapore; Editing by Lisa Shumaker)