* Brent-WTI spread narrowest in nearly five weeks * U.S. crude stockpiles fell 7.5 mln bbls last week -API * Two new pipelines set to drain oil from Cushing * Coming up: EIA weekly oil inventories data at 1530 GMT (Writes through with IEA data, updates prices, changes dateline; previous SINGAPORE) By Lin Noueihed LONDON, Dec 11 (Reuters) - Oil held steady above $109 a barrel on Wednesday, shrugging off predictions from the West's energy watchdog of rising global demand as the market awaited U.S. data that is expected to show a drop in crude stockpiles. The International Energy Agency (IEA) said in its monthly report that after eight consecutive quarters of contraction, oil demand in the world's heavily industrialised countries returned to growth in the second quarter of this year. The Paris-based agency revised up its estimates for global oil demand growth by 145,000 barrels per day (bpd) to 1.2 million bpd for 2013 and by 110,000 bpd to 1.2 million bpd for 2014. Traders said those forecasts would not be enough to push the Brent contract out of the narrow range in which it has traded for the past year. "It is range-bound. I see us staying in that range today with about $110.50 a barrel at the upper end and about $109 a barrel at the lower end," said Christopher Bellew, trader at Jefferies Bache. "If anything it will break downwards but there is plenty of speculative length in the market in case the IEA is right." Brent crude oil was down 15 cents to $109.23 a barrel by 1010 GMT, after closing one cent lower on Tuesday. U.S. crude futures for January delivery stayed near a six-week peak at $98.52, up one cent after registering a 1.2-percent rise the previous day. Brent's premium to West Texas Intermediate (WTI) crude futures CL-LCO1=R has fallen nearly $8 since end-November, as changes in pipeline flows may ease a supply glut at WTI's delivery point in Cushing, Oklahoma, while nationwide crude inventories could fall for a second week. Two new pipelines are set to drain oil from Cushing in the next few months - a 700,000 bpd TransCanada Corp pipeline and a Royal Dutch Shell pipeline to send crude to Louisiana. "The spread has narrowed too quickly. I think the buying of WTI is overdone," said Yusuke Seta, a commodity sales manager at Newedge Japan. Crude inventories in the United States were still at the highest in a decade and production was increasing, Seta said. The EIA will release inventories data later on Wednesday that may show a second weekly drop in crude stockpiles. Data from the American Petroleum Institute industry group showed on Tuesday that crude inventories fell by 7.5 million barrels in the week to Dec. 6. Analysts had expected a 3-million barrel drop in a Reuters poll. "The stock draw in API figures failed to cause an increase in Brent," Bellew said. Analysts said the United States had become dislocated from the global market since the shale boom and inventory reductions were unlikely to have a marked effect on Brent. Traders are also keeping an eye on the progress of talks between Tehran and six world powers over the implementation of a landmark nuclear deal that could ease sanctions on Iranian oil and increase supply. "Risks to Brent remain to the downside," said Michael Hewson, analyst at CMC Markets. (Additional reporting by Florence Tan in Singapore; editing by Jason Neely)

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