* EIA reports large rise in U.S. crude inventories
* Brent premium to U.S. crude exceeds $10 a barrel
* Coming up: Fed statement 1915 GMT
(Recasts with U.S. oil supply report, updates prices)
By Alex Lawler and Emma Farge
LONDON, Jan 26 (Reuters) - U.S. crude held above $86 a
barrel on Wednesday and Brent rose more than $1 as a weaker
dollar ahead of a Federal Reserve statement and rising equities
countered a big rise in U.S. crude inventories.
U.S. crude briefly turned negative after the U.S. Energy
Information Administration reported a 4.84 million-barrel rise
in crude stocks. Still, some analysts said that was unlikely to
stand in the way of higher prices. []
"What does it really mean to price? Very little. By the end
of the day, I think we'll be more along the lines of what the
equity markets are doing," said Kyle Cooper, managing director
at IAF Advisors in Houston.
"I still maintain the overall market is driven way more by
financial flows than by weekly inventory numbers.
U.S. crude <CLc1> was up 3 cents at $86.22 as of 1620 GMT,
while Brent crude <LCOc1> gained $1.30 to $96.55.
European shares rose on Wednesday in a move that also helped
to lift sentiment on the oil market, and U.S. stocks were up
early in the session. [] []
High U.S. crude inventories, especially at the Cushing,
Oklahoma, delivery point for the U.S. crude contract, also known
as West Texas Intermediate or WTI, have helped keep U.S. crude
prices below Brent.
"Brent and WTI have been trading increasingly as entirely
separate commodities in recent weeks, driven by decidedly
different fundamentals," said J.P. Morgan analysts in a report.
"Unsurprisingly, the main issue for the wide Brent-WTI
spread seems to lie not with Brent but rather with WTI."
PRODUCTS MIXED
The EIA report released at 1530 GMT showed a mixed trend for
stocks of refined fuels. Gasoline stocks rose by 2.4 million
barrels and distillates supplies fell by 140,000 barrels.
In his State of the Union address to Congress Tuesday night,
President Obama asked lawmakers to work with him to cut the rate
and simplify the tax code, moves that could lead to higher
corporate profits. []
"Prices are holding and part of that may be due to the fact
that President Obama, in his State of the Union message, had
struck a generally pro-business stance," said Phil Flynn,
analyst at PFGBest Research in Chicago.
The Fed is expected to underscore reasons for optimism even
as it reaffirms its economic stimulus plan to buy $600 billion
in government debt in its 1915 GMT statement. []
The EIA report showed a bigger rise in crude stocks than
industry group the American Petroleum Institute, which on
Tuesday said inventories increased by 2.1 million barrels.
The two oil benchmarks hit more than two-year highs earlier
in January with Brent trading just 80 cents short of the $100 a
barrel milestone on Jan. 14.
Analysts at Credit Agricole CIB and Facts Global Energy said
that the immediate risk of a breach of $100 had now receded with
prices likely to trend lower through the first quarter.
"I think the fall is justified by the disappearance of very
cold weather in Europe and the restart of the Alaskan pipeline
as well as signs that the Organization of the Petroleum
Exporting Countries is increasing production," said analyst
Christophe Barret at Credit Agricole.
(Additional reporting by Florence Tan in Singapore and Reuters
energy desk in New York; editing by William Hardy)
