* U.S. lawmakers closer to two-year budget deal * Expectations rise of tapering at next week's Fed meeting * Libya may reopen three oil ports this weekend * Coming up: U.S. weekly jobless claims due 1330 GMT (Adds comments, updates prices) By Jacob Gronholt-Pedersen SINGAPORE, Dec 12 (Reuters) - Brent futures held steady above $109 a barrel on Thursday as a looming U.S. budget deal backed expectations the Federal Reserve may act soon to unwind a stimulus programme that has supported oil prices, keeping investors at bay. Oil fell earlier in the day along with most other commodities, while Asian shares dropped to a four-week low, after Republicans in the U.S. House of Representatives were seen backing a two-year budget deal negotiated behind closed doors. "Passing of the budget would give the Fed one last reason to exit the stimulus programme. Expectations are creating a weaker sentiment for oil and other commodities," said Chee Tat Tan, investment analyst at Phillip Futures in Singapore. Brent crude oil fell as much as 21 cents to $109.49 a barrel and was down 1 cent at $109.69 by 0729 GMT, after settling 32 cents higher. U.S. crude futures for January delivery were 9 cents lower at $97.35. A vote on a tentative budget agreement is likely to be held this week. A deal would remove fiscal uncertainty ahead of next week's much-anticipated Federal Reserve meeting. US STOCKPILES U.S. crude inventories fell 10.6 million barrels last week to 375 million barrels, according to the Energy Information Administration, much more than the 3-million-barrel draw forecasted by analysts polled by Reuters. "The latest stock decline was driven by continuing high refinery demand and a marked weekly decline in crude imports," analysts at BNP Paribas said in a note. Refinery utilisation may have increased only 0.2 percentage points from a week ago, but with already high run rates, demand for crude is now back at peak summer levels and up 764,000 barrels per day from a year ago, BNP Paribas said. But the U.S. benchmark oil contract closed $1.07 lower on Wednesday, as investors viewed the steep decline as a move by refiners to avoid taxes instead of a sign of strong demand. Also weighing on prices was a sharp rise in U.S. gasoline inventories, signalling weak domestic demand ahead of the holiday season. "This is a concern because crude production in the United States is rising. All put together we see a bearish picture," said Tan of Phillip Futures. Nevertheless, the International Energy Agency (IEA), the West's energy watchdog, said surging oil demand, especially in the United States, and faltering supplies mean oil prices face upside risks over the next few months. Last month, U.S. oil demand jumped above 20 million barrels per day (bpd) for the first time since the 2008 financial crisis, IEA data showed, although it was not clear whether part of this demand reflected higher exports from U.S. refiners. Comments from Libyan officials that three oil ports that had previously shipped around 600,000 bpd of oil could reopen this weekend weighed on Brent prices. Seizures of ports and oil fields by protesters demanding a bigger share of oil exports have slashed Libya's oil shipments to some 110,000 bpd, from more than 1 million bpd in July. Investors will keep an eye for U.S. weekly jobless claims due at 1330 GMT for signs of continued recovery in the world's biggest economy. (Additional reporting by Manash Goswami; Editing by Tom Hogue and Jacqueline Wong)

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