Oil rises near $71 after large fall in U.S. crude stocks

                                
 * Oil rises towards $71 after 7-mth high close above $70
                                
 * API sees more-than-expected 6-mln-bbl fall in crude
stocks
                                
 * Market awaits EIA inventory data for confirmation
                                
 By Maryelle Demongeot
                                
 SINGAPORE, June 10 (Reuters) - Oil raced towards $71 a
barrel on Wednesday, after settling above $70 for the first
time in seven months on a larger-than-expected fall in crude
oil stocks and a forecast that falling oil demand may have
bottomed.
                                
 The American Petroleum Institute (API) reported a deep fall
of 6 million barrels in U.S. crude stocks in the week ended
June 5, beating analysts'expectations for a 400,000-barrel
draw, and steady products inventories versus forecast builds.
[EIA/S]
                                
 U.S. light crude for July delivery <CLc1> rose 84 cents to
$70.85 a barrel by 0203 GMT, off an earlier high of $70.94
after ending Tuesday at $70.01, the first settlement above $70
in seven months.
                                
 London Brent crude <LCOc1> gained 55 cents to $70.17.
                                
 "The stats are another sign that we may have reached
bottom. Relatively speaking, it seems that things are getting
better and it should be bullish from there," said Tony Nunan,
risk manager at Mitsubishi Corp in Tokyo.
                                
 Oil has more than doubled since the low $30s hit this
winter on optimism of an economic recovery that would lead to
higher oil demand, although prices are still more than 50
percent below a record high of $147.27 touched last July.
                                
 Strengthening hopes of a recovery, the U.S. Energy
Information Administration (EIA) on Tuesday raised its 2009
demand forecast by 10,000 barrels per day in its June outlook,
the first time since September that it has increased the demand
estimate in its rolling monthly forecast. [ID:ID:nN09385541]
                                
 Prices could gain further on Wednesday if the EIA confirms
the API's fall in crude inventories, in its own data on
Wednesday to be released at 1430 GMT.
                                
 "Any EIA reinforcement tonight of the already released API
inventory data will serve to underpin $70 as support," Jonathan
Kornafel, Asia director of Hudson Capital Energy, said in a
morning report.
                                
 A Reuters expanded inventory poll from 13 analysts called
for a 400,000 barrel drawdown in crude stocks, a 1.4 million
barrel build in distillate stocks and an 800,000 barrel
increase in gasoline stocks. Refinery utilization was seen
rising 0.3 percentage point to 86.6 percent of capacity [EIA/S]
                                
 The U.S. dollar, whose weakening contributed to pushing
prices up $1.92 on Tuesday, steadied on Wednesday after
investors questioned whether the economy had improved enough to
justify talk of a Federal Reserve rate hike by year-end. [USD/]
                                
 Investors tend to flock to commodities as a hedge against
inflation when the dollar falls.
 (Editing by Clarence Fernandez)