UPDATE 4-Oil rises above $78 on economic growth optimism

                                
 * European, Asian shares rise on upbeat corporate earnings
                                
 * Chance of tropical storm off U.S. gulf growing
                                
 * Coming Up: EIA U.S. oil inventory, demand report; 1430 GMT
                                
 
                                
 (Adds details, updates prices)
                                
 By David Turner and Joe Brock
                                
 LONDON, July 21 (Reuters) - Oil rose above $78 a barrel on
Wednesday after Tuesday's strong U.S. corporate earnings raised
optimism over the strength of economic recovery in the world's
largest economy.
                                
 U.S. crude <CLc1> for September, the front-month contract
after Tuesday's expiry of August, rose 53 cents to $78.11 a
barrel, before dipping to $77.83 at 0950 GMT.
                                
 London ICE Brent futures <LCOc1> gained 34 cents to $76.56.
                                
 The optimism that started on Wall Street <.SPX> on Tuesday
spread to European <.FTEU3> and Asian equities <.HSI> <.NSEI> on
Wednesday.
                                
 Sentiment was helped by strong earnings from Apple <AAPL.O>
and speculation that Fed Reserve Chairman Ben Bernanke may
suggest steps to spur lending in testimony to U.S. lawmakers
later on Wednesday.
                                
 Investors should have a clearer picture of how well U.S.
businesses are recovering following the economic meltdown, from
a flurry of companies reporting second-quarter results later on
Wednesday, including financial services group Wells Fargo
<WFC.N> and investment bank Morgan Stanley <MS.N>.
                                
 However, industry data released late on Tuesday showed crude
stocks in the United States fell by a smaller-than-expected
241,000 barrels in the week to July 16. [ID:nN2097449]
                                
 "I think the data was relatively neutral with a very small
decline in crude stocks," said Christophe Barret, oil analyst at
Credit Agricole.
                                
 "The corporate earnings in the U.S. and equities are having
a short-term supportive impact on oil prices," Barret added.
                                
 Closely watched U.S. crude and product inventory government
data from the Energy Information Administration is due on
Wednesday at 1430 GMT. [EIA/S]
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 Graphic on commodity performance:
                                
 http://graphics.thomsonreuters.com/10/CMD_PRFG0510.html
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 The U.S. National Hurricane Center raised the likelihood
that a tropical depression or storm would form over Puerto Rico
and Hispaniola in the next two days to 70 percent from 60
percent late on Tuesday.
                                
 The storm could eventually reach the oil-rich Gulf of
Mexico. If this hit production, it would likely support an oil
price rally.
                                
 "This (tropical storm) could have a big impact in the coming
days and it will be closely watched, but we'll have to wait and
see," Barret said.
                                
 The Center has forecast this year's Atlantic storm season
may be the most intense since 2005, when hurricanes Katrina and
Rita nearly paralysed U.S. oil output and refining along the
Gulf coast.
                                
 BP <BP.L> Plc rejected a Times of London report on Wednesday
that Chief Executive Tony Hayward was to step down within the
next 10 weeks.
 (Additional reporting by Alejandro Barbajosa; editing by Sue
Thomas)