RTRS:Brent slips towards $112, holds on upbeat economic sentiment
* Sentiment up on BOJ stimulus plan, strong German investor confidence
* U.S. to extend debt limit by 4 months, defusing fears of default
* Analysts expect higher US crude, oil products stockpiles
By Florence Tan
SINGAPORE, Jan 23 (Reuters) - Brent crude held above $112 a barrel on Wednesday, supported by a brighter outlook for the global economy, while investors awaited inventory data from the United States for clues to demand in the world's largest oil consumer.
Appetite for riskier assets was buoyed on Tuesday by the Bank of Japan's plans to shore up the world's third largest economy and strong investor confidence data from Germany. These added to upbeat economic data this month from the top two economies, the United States and China.
Brent crude edged down 13 cents to $112.29 a barrel by 0714 GMT. U.S. crude for March was at $96.59, down 9 cents, and off a four-month high of $96.90 hit earlier.
"The sentiment from investors is getting better than before but it may take 1 to 2 years (for investors) to be really confident about rapid economic growth," said Ken Hasegawa, a commodities sales manager at Newedge Japan.
"So the oil market may move in a narrow range this year, not as volatile as last year."
Asian equities nudged higher on Wednesday following gains on Wall Street overnight. The United States is expected to extend its debt limit by nearly four months to May 19, temporarily defusing fears of a damaging default.
In Israel, a weaker-than-expected showing by Prime Minister Benjamin Netanyahu in Tuesday's election might limit his room for manoeuvre against Iran and put his hardline stance toward Palestinian statehood under renewed pressure.
In the United States, West Texas Intermediate (WTI) crude futures rose this month, narrowing their spread with Brent CL-LCO1=R to less than $16, after the expanded Seaway oil pipeline started operations and eased a glut in the Midwest region.
Technical charts showed that WTI may try to extend gains to hit $100 by the end of this month, Hasegawa said, adding that this could also boost Brent prices.
Morgan Stanley analysts said they expect the Brent-WTI spread to stay between $10 and $20 a barrel at least in the first half of 2013 as the pipeline expansion will not be enough to clear the bottleneck at Cushing, Oklahoma, the delivery point for WTI contracts.
The Obama administration has delayed a decision on TransCanada Corp's rerouted Keystone XL oil pipeline until after March, even though Nebraska's governor on Tuesday approved a plan for part of the line through his state.
"The Keystone XL Gulf pipeline (forecast to be ready in late 2013) is needed to fully clear Cushing," analysts at Morgan Stanley led by Hussein Allidina said in a note.
"Even then, additional transport costs and quality issues in the Gulf should keep WTI-Brent in a $6 to $10 a barrel range."
On Tuesday, Goldman Sachs cut its 2014 U.S. crude forecast by $1.50 to $96.50 per barrel, and warned the Texas Gulf Coast may face a glut of light sweet crude oil later this year as other expanded pipelines move more oil south from the Midwest.
The American Petroleum Institute will release weekly U.S. oil inventory data on Wednesday, delayed a day by a holiday. Data from the U.S. Energy Information Administration will be released on Thursday.
The data is expected to show builds in U.S. crude, gasoline and distillate inventories, according to a Reuters poll of analysts. (Additional reporting by Seng Li Peng; Editing by Clarence Fernandez)
