UPDATE 3-Oil rises above $84 as European flights resume

                                
 * U.S. gasoline, distillates stocks unexpectedly fall -API
                                
 * European flights resume after volcanic ash disruption
                                
 * Coming Up: EIA inventories, 1430 GMT

                                
 (Updates throughout, adds graphic, previous SINGAPORE)
                                
 By Joe Brock
                                
 LONDON, April 21 (Reuters) - Oil rose above $84 on Wednesday
after data showing an unexpected drop in U.S. crude inventories
and the resumption of European air travel boosted optimism over
the strength of global fuel demand recovery.
                                
 An ash cloud from a volcanic eruption in Iceland last week
severely disrupted European air travel, slashing jet fuel demand
and weighing on crude prices.
                                
 But flight bans related to the volcanic ash were lifted on
Tuesday, alleviating concerns some investors had over the impact
the disruptions would have on fuel demand. [ID:nLDE63K09G]
                                
 "The resumption of flights is certainly helping prices,"
said Tony Machacek, broker at Bache Commodities.
                                
 "This is combined with inventory data showing drawdowns
across the board...people will be waiting for the DOEs (U.S.
government inventory data) for confirmation of what is really
happening with U.S. stocks."
                                
 U.S. June crude futures rose 56 cents to $84.41 a barrel at
0935 GMT, still $3 below an 18-month high reached on April 6.
ICE Brent for June <LCOc1> rose 86 cents to $85.66.
                                
 The front-month U.S. crude contract <CLc1> has rebounded
almost 5 percent from a low of $80.53 two days ago, helped by
Tuesday's expiration of the May contract. Crude is now trading
in the middle of a new $80-$87 range.
 
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
                                
For a graphic on recent U.S. crude oil highs and lows, click
here:
http://graphics.thomsonreuters.com/gfx/ACO_20102104085023.jpg
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
                                
 
                                
 INVENTORY DROP
                                
 Prices got a boost from unexpected drops in U.S fuel
inventories last week and a larger-than-forecast decline in
crude inventories reported by the industry-funded American
Petroleum Institute on Tuesday. [ID:nN20130519]
                                
 Attention was set to turn to the more closely watched
government statistics on inventories from the Energy Information
Administration (EIA) due at 1430 GMT.
                                
 Last week and on Monday oil prices retreated after legal
action was taken against Goldman Sachs, hitting the appetite for
riskier investments but upbeat corporate results on Tuesday
helped to encourage investors back for such assets as oil.
                                
 Apple Inc <AAPL.O> reported higher-than-expected earnings on
Tuesday, while Goldman Sachs  results beat forecasts.
[ID:nLDE63K0BG] [ID:nTOE63K07K] Later on Wednesday, Morgan
Stanley and McDonald's will be among a number of companies
reporting first quarter results.
                                
 Traders were also looking at data out of China, which shows
diesel exports in March rose to the highest this year, while
gasoline exports rebounded to levels similar to January as oil
firms draw down their brimming fuel stockpiles after months of
hefty production. [ID:nTOE63K04N]
                                
 China is under pressure to boost the value of its currency
because trading partners including the United States. say it is
undervalued. A stronger yuan would mean larger oil imports by
the world's second-biggest oil consumer. 
 (Additional reporting by Alejandro Barbajosa; editing by Keiron
Henderson)