UPDATE 7-Oil rises as optimism outweighs US inventory build

                                
 * International Energy Agency lowers 2010 demand estimate
                                
 * EIA data shows large U.S. crude stock rise
                                
 *
 (Updates prices, details)
                                
 By Matthew Robinson
                                
 NEW YORK, Aug 12 (Reuters) - Oil rose 1.5 percent
on Wednesday as a stock market rally raised optimism about the
economy, offsetting concerns about rising inventories and weak
demand in top consumer the United States.
                                
 U.S. crude <CLc1> gained $1.05 to trade at $70.50 a barrel
by 1:55 p.m. EDT (1755 GMT). London Brent crude <LCOc1> rose 65
cents to $73.11 a barrel.
                                
 The gains came as global stock markets posted a broad
rally, led by technology and home-building shares after
positive outlooks from semiconductor product manufacturer
Applied Materials Inc and luxury home builder Toll Brothers
Inc. [.N]
                                
 "It's pretty clear that the fundamental picture remains
bearish, but it remains to be seen when crude prices will react
accordingly, since they have continued to react to (a rise in
the) S&P stocks and the weakening dollar," Addison Armstrong,
director of market research at Tradition Energy, said.
                                
 The dollar slipped from a 1-1/2 week high against the euro
on Wednesday with investors cautious ahead of the U.S. Federal
Reserve's policy statement due later in the session.
[ID:nN12125792]
                                
 Adding some support, the National Hurricane Center said the
Atlantic could get its first named storm of the year as a
tropical depression strengthens on a track toward the U.S.
Virgin Islands. [ID:nN12106751]
                                
 Tropical storms and hurricanes can disrupt the operations
of offshore oil platforms and coastal refineries.
                                
 Oil's strength came despite a report from the U.S. Energy
Information Adminstration showing U.S. crude oil inventories
rose 2.5 million barrels in the week to Aug. 7, well over
analysts' expectations for a 700,000 barrel build.
                                
 The build came as U.S. refiners cut back on runs with the
recession keeping total product demand below year-ago levels.
                                
 The Federal Reserve is expected to end its buying program
of long-term government securities at a meeting that concludes
Wednesday, but keep U.S. interest rates steady at near zero
amid signs the economy is stabilizing from the deep recession.
[ID:nN1272730]
                                
  Despite some positive economic signs, the International
Energy Agency (IEA) forecast global oil demand growth will be
lower in 2010 than previously expected, with little evidence a
recovery is under way yet. [ID:nLC558744]
                                
 The Paris-based agency, adviser to 28 industrialized
nations, said global oil demand was now seen recovering by just
1.3 million barrels per day (bpd) in 2010, having fallen by 2.3
million bpd this year as the economic crisis curbed
consumption.
                                
 "Evidence of a bottoming out of the recession is still a
bit patchy. The latest data on industrial production for some
of the larger countries remains negative," David Martin,
analyst at the IEA, told Reuters.
                                
 "There is not clear evidence yet we have seen the worst."
 (Reporting by Matthew Robinson, Robert Gibbons, Richard
Valdmanis and Gene Ramos in New York City; David Sheppard in
London; Maryelle Demongeot in Singapore; Editing by David
Gregorio)