UPDATE 2-Oil holds above $74 on US inventory data

                                
 * U.S. crude, distillates, gasoline stocks fall
                                
 * Dollar strength caps gains on oil, commodities
                                
 * Strong U.S. home sales data rallies sentiment
 
 (Updates prices, previous SINGAPORE)
                                
 LONDON, Dec 23 (Reuters) - Oil traded above $74 on
Wednesday, buoyed by a sharp drawdown in U.S. crude stocks and
an unexpected fall in the gasoline supply, but a firmer dollar
limited gains.
                                
 U.S. crude for February <CLc1> rose 24 cents to $74.64 a
barrel by 0821 GMT in thin pre-holiday trade, after rising 68
cents on Tuesday. Prices have gained almost $6 since Dec. 13.
                                
 London Brent crude for February <LCOc1> rose 31 cents to
$73.77.
                                
 Crude inventories in the world's biggest oil consumer fell
3.7 million barrels last week against analysts' expectations of
a 900,000-barrel drop, the American Petroleum Institute (API)
said on Tuesday. [ID:nAPI000032]
                                
 The U.S. Energy Information Administration's (EIA) weekly
report is due at 10:30 a.m. EST (1530 GMT) on Wednesday.
                                
 "The API data (is bullish) and the market anticipates EIA
data...to show resonably significant drawdown in the crude
stocks as well as in some of the oil products stocks," said Ben
Westmore, commodities economist at National Australia Bank.
                                
 "That's sort of positive short-term sentiment."
                                
 Gasoline inventories fell 1.1 million barrels as imports
also slipped, API data showed, after a Reuters poll forecast a
1.2 million-barrel build. [ID:nN22107064]
                                
 Inventories of distillate fuels fell by just 745,000
barrels, against forecasts for a 1.9 million-barrel drop,
despite cold weather in the U.S. Northeast, the biggest heating
oil market in the world. Total U.S. heating oil inventories fell
by 993,000 barrels. [EIA/S]
                                
 
                                
 ECONOMY OPTIMISM
                                
 Oil's recovery was curbed by a strengthening dollar, which
touched a two-month high versus the yen on positive U.S.
economic news and the steepest Treasury yield curve on record.
[USD/]
                                
 The dollar also held firm against a currency basket. <.DXY>
                                
 Oil prices have often retreated this year when the dollar
firms, making crude more costly for holders of other currencies.
                                
 Further optimism about an economic recovery was reflected by
surprisingly strong sales of previously owned U.S. homes, which
boosted Western stock markets, and Asian equities followed suit.
                                
 U.S. existing home sales jumped 7.4 percent in November to
an annual rate of 6.54 million units, the fastest pace since
February 2007. [ID:nN22392364]
                                
 As expected, the Organization of the Petroleum Exporting
Countries (OPEC) left output policy unchanged with the implied
target for members' output, excluding Iraq, at 24.84 million
barrels per day (bpd).
                                
 But concerns remain about the organisation's ability to
persuade members to stick to quotas. [ID:nLDE5BL0Y4]
[ID:nLDE5BL0I9]
 (Reporting by Chris Baldwin in London and Judy Hua in Singapore)