UPDATE 11-Oil settles above $69 on Wall Street gains

                                
 * API data shows a steep drop in US crude stockpiles
                                
 * Weak dollar adds supports to oil
 (Updates with API data, market reaction)
                                
 By Rebekah Kebede
                                
 NEW YORK, Aug 18 (Reuters) - Oil rose more that 3 percent
to top $69 a barrel on Tuesday as stronger-than-expected
earnings results lifted equities and boosted optimism about the
economy.
                                
 U.S. crude <CLc1> settled at $69.19 a barrel, up $2.44, or
3.66 percent, with further support coming from the weaker
dollar. U.S. crude later traded up to $70.08 a barrel after
data from the American Petroleum Institute showed a steep drop
in oil inventories.
                                
 London Brent crude <LCOc1> settled at $72.37, up $1.83.
                                
 "We are just taking our cues from the S&P and the dollar,"
said Stephen Schork, editor of The Schork Report in Villanova,
Pennsylvania.
                                
 Two major U.S. retailers, Home Depot <HD.N> and Target
<TGT.N>, beat Wall Street expectations on Tuesday, lifting
markets. [.N]
                                
 The results offset government data that showed U.S. housing
starts and permits fell unexpectedly in July after increasing
in June. [ID:nN18415083]
                                
 Data from the API showing a surprise 6.1 million barrel
draw in U.S. crude stockpiles sent crude higher in
post-settlement trading. [API/S] Analysts polled by Reuters had
expected a 1.3 million barrel build. [EIA/S]
                                
 "The API's report of a huge drawdown in crude inventories
is a real shocker for the market," said Phil Flynn, Analyst at
PFGBest Research in Chicago.
                                
 "That seems to have happened with imports down sharply and
this will make analysts and traders go back to their drawing
boards to find out exactly how this happened."
                                
 Distillate stocks rose by 1.5 million barrels, according to
the API, more than double what analysts had expected. Gasoline
stocks fell less than forecast.
                                
 The market was also awaiting weekly inventory data from the
U.S. Energy Information Administration, to be released on
Wednesday.
                                
 Traders were also keeping an eye on storms in the Atlantic
Basin, although there was no immediate threat seen to U.S oil
installations in the Gulf of Mexico, home to a quarter of U.S.
oil output and 15 percent of its natural gas production.
                                
 Forecasters said tropical rainstorm Ana may regain strength
over the warm water of the eastern Gulf of Mexico later this
week, but has little chance of becoming a hurricane over the
next day or so as it crosses Haiti and Cuba. [ID:nN18414031]
                                
 Hurricane Bill, the first hurricane of the 2009 Atlantic
season, headed west-northwest over open ocean on Tuesday, but
it was uncertain whether it could threaten the northeast U.S.
coast, far from Gulf Coast oil installations, by Sunday.
[ID:nN18413228]
 (Reporting by Rebekah Kebede, Robert Gibbons and Gene Ramos in
New York; Joe Brock in London; Editing by Marguerita Choy)