* U.S. stockpiles down 3.1 mln barrels last week - API
* U.S. oil discount to Brent hits narrowest since Jan
* Traders eye Fed policy meeting in next two days
* Coming up: EIA stocks data at 1430 GMT
(Updates prices, detail)
By Lisa Barrington
LONDON, Sept 16 (Reuters) - Oil rose more than 2 percent on
Wednesday after an unexpected drawdown in U.S. stockpiles, an
increase in U.S. gasoline prices, and on the back of rising
global markets.
But concerns remained about a global surplus, falling Asian
demand and whether the U.S. Federal Reserve would raise interest
rates.
The Labor Department said on Wednesday its consumer price
index fell 0.1 percent last month, the first decline since
January, pointing to tame inflation that complicates the Fed's
decision whether to raise rates. ID:nL1N11M0RR
U.S. crude futures strengthened after the American Petroleum
Institute (API) reported a 3.1-million-barrel drop in crude
inventories last week, versus analyst expectations for an
increase. API/S
"It is a big data week," CMC Markets analyst Michael Hewson
said. "We are likely seeing a bit of position adjustment ahead
of key market data."
Official U.S. crude inventory figures will be released on
Wednesday at 1430 GMT. ID:nL5N11L0WF EIA/S
Front-month U.S. West Texas Intermediate (WTI) crude futures
CLc1 for October traded $1.35 higher at $45.94 per barrel at
1350 GMT, with U.S. gasoline prices RBc1 up for a second
straight day after a fall of around 10 percent since the start
of the month.
Brent crude LCOc1 for November was up $1.54 at $49.29 a
barrel. The Brent October contract expired on Tuesday.
Global stock markets rose ahead of a U.S. Fed two-day
session to decide whether to raise rates for the first time in a
decade.
Higher U.S. interest rates would likely attract cash from
money traders, lifting the dollar. That could be bearish for oil
markets as it would raise prices for holders of other
currencies. ID:nL4N11M01H
The prospect of falling U.S. oil production as prices skim
six-year lows has narrowed the gap between benchmark U.S. and
Brent crude futures. ID:nL1N11H1CT
ID:nL5N11L310 ID:nL5N11L26U
The Brent-WTI spread CL-LCO1=R between the two prompt
months shrank on Tuesday to around $1.45 a barrel, the narrowest
since January, when WTI briefly cost more than Brent.
"We believe that this could be the market's reaction to the
decline in U.S. crude production (drilling) ... further
exacerbated as Iranian crude could be entering the market, which
puts heavy pressure on the global benchmark (Brent)," said
Daniel Ang, analyst at Singapore-based Phillip Futures.
Iranian crude stored in tankers could quickly enter world
markets once sanctions against Tehran are lifted.
Oil prices have fallen by almost 60 percent since June 2014
on concerns about oversupply and slowing Asian demand, factors
that continue to weigh on prices.