UPDATE 3-Oil rises above $108 as more monetary stimulus eyed

* Expectations of QE4 from U.S. Fed boosts risk assets

* IEA says oil supply ample given weak European demand

* Coming up: U.S. weekly oil inventories at 1530 GMT

(Recasts, adds quotes, updates prices, previous SINGAPORE)

LONDON, Dec 12 (Reuters) - Brent crude oil rose above $108 a barrel on Wednesday supported by expectations of a fourth round of monetary stimulus from the U.S. Federal Reserve later in the day, although concerns about oversupply and weak demand limited gains.

Brent crude futures were up 60 cents to $108.61 a barrel by 0950 GMT, rebounding from last week's dip. U.S. crude was up 43 cents to $86.22 a barrel.

Analysts said riskier assets such as oil were being boosted by market expectations that the U.S. Federal Reserve will unveil fresh stimulus measures later today.

Markets expect the Fed to expand its current asset purchase scheme, committing to buy $45 billion of U.S. debt, and extend its purchases of mortgage-backed debt, to help sustain the fragile U.S. economic recovery.

"The market has absolute confidence this will happen and it will be extremely disappointing if it doesn't come," said Filip Petersson, a commodity strategist at SEB in Stockholm. "It's risk on for this reason."

The expectation of fresh stimulus measures is weighing on the dollar, which has trended downwards against a basket of currencies this week.

A weaker dollar makes commodities priced in dollars more affordable for holders of other currencies.

European shares and the euro, plus other commodities such as copper and gold, are also being underpinned by the stimulus hopes, reflecting the general improvement in market sentiment.

SLUGGISH DEMAND GROWTH

The picture was more bearish from a fundamental perspective, however, with the International Energy Agency (IEA) forecasting sluggish demand growth throughout 2013 and comfortable oil supply levels.

In its monthly report, the IEA forecast global oil demand growth for 2013 at 865,000 barrels per day, 110,000 bpd higher than in its previous report, taking consumption up to an average of 90.5 million barrels per day.

On the supply front, spectacular growth in U.S. production on the back of a boom in shale oil is seen as a key development in 2013.

Abundant supply was also a concern for some OPEC ministers at a meeting in Vienna, where Algeria's oil minister said OPEC was producing too much oil given weaker demand and high inventory levels.

OPEC's production declined in November closer to its oil output target of 30 million barrels per day (bpd), led by a cut in Saudi Arabian output.

Iran has said it would prefer a much lower 28 million bpd oil output target, but is happy to back an unchanged cartel target of 30 million bpd for now.

Saudi Arabia increased supply earlier in the year to replace the 1 million-bpd drop caused by Western sanctions against Iran over its disputed nuclear programme.

But OPEC warned on Tuesday that world oil demand growth could underperform in the first half of 2013 due to economic weakness.

AMPLE SUPPLIES

Taking this into account, SEB's Petersson said OPEC output had to drop or there would be even more surplus oil in the market next year, and prices would come under pressure.

"It looks like there are enough supplies to cope with any pick up in demand," agreed Ole Hansen, senior commodity strategist at Saxo Bank.

"We will start the year on a relatively weak note in many regions so oil prices are likely to stay within the range they have established over the last few months."

The market is also looking to weekly U.S. crude oil and refined products inventory data, due from the Energy Information Administration later on Wednesday.

"There's a lot of focus on U.S. production which continues to surprise," said Hansen. "Last week we had a big spike in gasoline stocks and there have also been builds in distillates."

The U.S. winter is forecast to be one of the warmest on record, which has put heating oil and natural gas prices under downward pressure over the last few weeks.

A Reuters poll found analysts expect U.S. crude oil stocks to have fallen over the week amid high refinery demand, while gasoline inventories are expected to show a rise.

Hansen believes the market will remain rangebound for the time being, saying that prices have found support at $107 a barrel, encouraging day-traders to re-enter the market.

"That has created a base. If we can get a foothold at $108.40 it could try to make a pop to the upside, but I think it will run out of steam between $109 and $110," he said.

(Additional reporting by Florence Tan in Singapore; Editing by Alison Birrane)