UPDATE 11-Oil rises on 'fiscal cliff' optimism, refinery issues

* Equities, oil rise as hopes grow for a 'fiscal cliff' deal

* Product futures lead oil complex higher on Motiva problems

* Coming up: EIA oil inventory data 10:30 a.m. EST Wednesday

(Adds crude trading volume, API data, paragraphs 9, 15-19)

NEW YORK, Dec 18 (Reuters) - Oil prices rose on Tuesday as

apparent progress in resolving the U.S. budget crisis eased

concerns that the world's top economy could slip into recession.

As the White House and Republicans appeared to edge closer

to a resolution to avert the "fiscal cliff" that would increase

income taxes for most Americans beginning Jan. 1, investors

poured cash into riskier asset classes such as oil and equities,

with U.S. stocks showing the biggest two-day gain in a month.

A resolution to the crisis looked closer after House of

Representatives Speaker John Boehner kept the support of his

Republican colleagues for compromises in talks with President

Barack Obama.

"Everything is keying on the 'cliff' hopes, because people

are assessing if we're closer to a deal," said Mark Waggoner,

president at Excel Futures Inc.

The budget debate and the ongoing euro zone crisis have

weighed on oil markets for months, raising worries that sluggish

fuel demand in developed economies could fall even further.

Investors have balanced consumption concerns against potential

supply disruptions because of rising unrest in the Middle East.

Gasoline and heating oil futures led the oil complex higher

on Tuesday on word Motiva Enterprises would again halt some

production on the 325,000-barrel-per-day (bpd) crude

distillation unit at its Port Arthur, Texas, refinery for more

repairs. The unit was shut down shortly after being launched

this year due to problems with pipes.

Front-month Brent crude oil prices rose $1.20 to

settle at $108.84 a barrel, briefly topping the 14-day moving

average of $108.87 a barrel.

January U.S. crude oil futures gained 73 cents to

settle at $87.93 a barrel, breaking above the 50-day moving

average of $87.64 a barrel after testing that level during

Monday's trade.

Trading volumes were light, with Brent volumes down nearly

33 percent from the 30-day moving average, and U.S. crude

volumes 24 percent off that average.

RBOB gasoline and heating oil futures rose by

1.5 and 1.3 percent, respectively, during late afternoon trade.

"Problems with the crude unit at the Motiva refinery in

Texas have helped lift gasoline and heating oil futures," said

John Kilduff, partner at Again Capital LLC in New York.

Motiva's decision to reduce production to conduct

maintenance on a "minor leak" comes one day after a small fire

broke out on the troubled unit, called VPS-5, which has spent

more time being repaired than in production since it started up

for the first time in late April.

As Brent crude prices headed toward the end of the year

close to levels where they started 2012, Ali al-Naimi, oil

minister of OPEC kingpin Saudi Arabia, said the market was well

balanced with prices above $100 a barrel. The world's largest

exporter has tried to achieve that price level by adjusting

production over the last two years.

Average Brent crude prices have been relatively stable over

the past two years, though they have at times spiked toward $120

and above as supplies from the Middle East have been disrupted

by the Arab Spring and as Western sanctions cut Iranian oil

exports.

U.S. OIL INVENTORIES

Crude futures prices had little reaction in post-settlement

trading to the American Petroleum Institute's (API) weekly

report showing crude stocks fell 4.1 million barrels last week

in the United States, much more than expected.

Gasoline stockpiles jumped 4.2 million barrels, while

distillate stockpiles fell 1.9 million barrels, the API said.

Ahead of the API data, crude oil stocks were expected to be

down 1.1 million barrels, a Reuters survey of analysts showed.

Gasoline stocks were expected to be up 1.8 million, while

distillate stocks were seen up 1.0 million barrels.

The U.S. Energy Information Administration's weekly report

will follow on Wednesday at 10:30 a.m. EST (1530 GMT).

(Reporting by Matthew Robinson and Robert Gibbons; Shadia

Nasralla and David Sheppard in London; Manash Goswami and Ramya

Venugopal in Singapore; Editing by Jim Marshall, Gunna Dickson,

David Gregorio, Phil Berlowitz and Bob Burgdorfer)

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