* API says US crude inventories rise 6.6 million barrels
* Coming Up: U.S. EIA weekly petroleum status report; 1430 GMT (Adds analyst quote in paragraph 4, further details)
By Alex Lawler
LONDON, April 11 (Reuters) - Oil edged higher to around $120 a barrel on Wednesday, after falling to its lowest level in almost two months, supported by increased investor appetite for riskier assets that also led to gains in equities and the euro.
Brent crude posted its biggest one-day drop this year on Tuesday as part of a sell-off in commodities and equities. On Wednesday, European shares rallied, other commodities such as copper steadied and the dollar fell.
North Sea Brent was up 15 cents at $120.03 a barrel by 1104 GMT, after falling as low as $119.05, the lowest since Feb. 17.
Its 2.27 percent slide on Tuesday was the biggest one-day percentage loss since Dec. 14. U.S. crude was up 61 cents to $101.63.
"Yesterday's sell-off was prompted by an increased risk aversion," said Carsten Fritsch, analyst at Commerzbank. "This recovery is part of a general rebound after yesterday's sharp drop."
European stocks moved higher, encouraging investors to buy riskier assets, including the euro. But rising U.S. crude inventories and concern about the strength of global demand kept oil's rebound in check.
The U.S. Energy Information Administration (EIA) on Tuesday cut its 2012 world oil demand growth forecast and later on Wednesday releases its weekly U.S. supply report, which analysts expect will show a further increase in crude stocks.
Global benchmark Brent has risen 11 percent this year, supported by supply outages and the threat of disruption from Iran, although in recent sessions concern about rising inventories and demand has come to the foreground.
Tuesday's session was the first time Brent has traded below $120 since Feb. 21. A further close below that mark could bring lower levels still into focus, a technical analyst said.
"If $120 cannot be regained then it will start to aim at $116.40, then $115.50 for the next big lines of support," said Olivier Jakob of Petromatrix. "For today, however, we will focus on the support at $119 and $118."
Later on Wednesday, the EIA is scheduled to release its weekly U.S. supply report. Analysts expect U.S. crude stockpiles to rise, building on the biggest two-week increase in more than a decade.
Oil industry group the American Petroleum Institute on Tuesday reported crude stocks rose 6.6 million barrels, more than three times the forecast increase of 2.1 million barrels.
On global demand, the EIA on Tuesday cut its 2012 world oil demand growth forecast by 170,000 bpd to 890,000 bpd. Monthly reports from two other closely watched forecasters, the International Energy Agency and OPEC, are due on Thursday.
Iran has agreed to renew discussions with the permanent members of the U.N. Security Council - the United States, Russia, China, Britain and France - plus Germany last month, more than a year after previous talks failed.
Oil analysts said the agreement on holding further talks could indicate progress and weigh on prices. The next round would be in Baghdad following this week's negotiations in Istanbul. (Reporting by Alex Lawler and Manash Goswami in Singapore; Editing by William Hardy and Jason Neely)
