* API reports 3.1 mln barrel stock drawdown last week
* U.S. crude discount to Brent down over 60 pct since August
* Traders eye Fed policy meeting in next two days
By Henning Gloystein
SINGAPORE, Sept 16 (Reuters) - Oil prices extended gains in
early trading in Asia on Wednesday after U.S. prices were
boosted by a stockpile draw, while a warning by OPEC producer
Iraq that it may slow spending on new fields pushed up
international crude contracts.
U.S. crude futures rose after industry group the American
Petroleum Institute (API) reported a 3.1 million-barrel crude
drawdown last week, versus analyst expectations for a build. A
surge in American gasoline prices was also supportive.
Outside the United States, international crude contracts
rose on reports that Iraq has told foreign companies developing
the country's southern oilfields that they may need to slash
development spending next year because it has less money to pay
them due to a slump in crude prices.
Front-month U.S. West Texas Intermediate (WTI) crude futures
CLc1 were trading at $45.01 per barrel at 0109 GMT on
Wednesday, up 42 cents from their last settlement.
Internationally traded Brent futures LCOc1 were up 18 cents at
$47.93 a barrel.
Despite the potential cut in Iraq's oil spending, analysts
said it would not immediately affect output from the second
biggest producer in the Organization of the Petroleum Exporting
Countries (OPEC).
"Iraq's government has asked oil companies to reduce their
2016 spending plans, citing lower oil prices and falling
government revenue. However the reduced budgets are not likely
to affect 2015 production, hence may not provide any immediate
relief to prices," ANZ bank said on Wednesday.
With U.S. crude prices receiving more support over the past
weeks than international Brent contracts, their discount to
Brent has narrowed by over 60 percent since mid-August to around
$2.50 per barrel, close to 2015 lows.
Oil markets will be keeping a close eye on Washington policy
makers in the next two days as the U.S. Fed begins a two-day
session to decide whether it will raise interest rates for the
first time in almost a decade.
Higher U.S. interest rates would likely attract cash from
money traders, lifting the dollar. This in turn is seen as a
bearish signal for oil as it makes fuel more expensive for
importers who use other currencies as crude is traded in dollar.
(Editing by Richard Pullin)