RTRS:UPDATE 3-Oil falls on concern about Federal Reserve direction
* Fresh conflict in Syria supports prices
* Weak demand outlook, well supplied market weigh
* Coming Up: API weekly crude stock report; 2030 GMT (Recasts with latest price action, updates throughout)
By Simon Falush
LONDON, May 21 (Reuters) - Brent oil futures fell towards $104 per barrel on Tuesday on concerns that the U.S. Federal Reserve might scale back its quantitative easing programme, which could damage fragile demand.
Comments by Fed officials and upbeat U.S. data last week fuelled speculation the central bank might start to reduce its bond purchases this year.
Investors are focussing on the release of minutes of the Fed's last meeting and testimony by Fed Chairman Ben Bernanke to Congress, both scheduled for Wednesday.
"The market is waiting to see what is going to happen with monetary policy and at what speed it will change," said Bjarne Schieldrop, head of commodity research at SEB in Oslo.
Front-month Brent futures fell 53 cents to $104.27 per barrel by 0948 GMT, after touching $105.31 in the previous session, the highest since May 7.
U.S. crude was down 20 cents to $96.51 but could gain support from inventory data due on Tuesday.
Analysts expect a drop of 400,000 barrels in U.S. crude stockpiles due to higher refinery activity and lower imports, according to a Reuters poll.
Lending some support to prices was fear that supply could be disrupted if fighting in the Middle East intensifies.
Reports that Lebanese Hezbollah guerrillas were involved in fierce fighting for Syria's embattled president prompted alarm the civil war may spread to neighbouring oil producers.
Initial estimates of Purchasing Managers' Indexes (PMIs) are due this week for China, the euro zone and the United States but are unlikely to dispel fears of a sluggish global economic outlook, Reuters polls show.
Highlighting these concerns, UBS trimmed its forecast for growth in China, the world's biggest energy consumer, citing weak credit expansion and credit growth.
"While some of the weakness may be transitory, increasingly evidence suggests that growth will be weaker than we previously envisaged," Tao Wang, UBS China economist, wrote in a report. (Additional reporting by Ramya Venugopal in Chennai, India; Editing by Richard Pullin and Jane Baird)
