UPDATE 7-Oil rises on 'fiscal cliff' optimism, refinery problems

* "Fiscal cliff" hopes lift shares, other risky assets

* Gasoline futures lead oil complex higher

(Updates throughout)

NEW YORK, Dec 18 (Reuters) - Oil prices rose on Tuesday as signs of progress in talks to resolve the U.S. budget crisis eased concerns the world's top economy could slip into recession.

As Democrats and Republicans appeared to edge closer to a resolution to avert the "fiscal cliff" that would increase income taxes for most Americans on Jan. 1, investors poured cash into riskier asset classes such as oil and equities.

"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 already struggling fuel demand from developed economies could fall further. Concerns about consumption have been balanced against potential supply disruptions due to rising unrest in the Middle East this year.

Gasoline futures led the oil complex higher on Tuesday, however, bolstered in part by yet another setback in Motiva's efforts to start a $10 billion, 325,000 barrel-per-day crude unit at its Port Arthur, Texas, refinery. The unit was shuttered shortly after it was launched earlier this year after problems with pipes were discovered.

Front-month Brent crude oil prices rose $1.13 to $108.77 a barrel by 11:46 a.m. (1646 GMT), briefly topping the 14-day moving average of $108.87 a barrel.

U.S. crude oil futures gained 84 cents to trade at $88.04 a barrel, breaking above the 50-day moving average of $87.64 a barrel after testing that level during Monday's trade.

RBOB gasoline traded up 1.73 percent, while heating oil futures rose 1.52 percent.

"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 Enterprises is planning again to shut down the new crude oil unit at the Port Arthur plant after failing to repair a leak that was discovered a day ago, sources familiar with operations said on Tuesday.

The possible end to the U.S. "fiscal cliff" stalemate comes as recent data points to a revival in demand in China, the world's second-largest oil consumer.

The oil minister of OPEC kingpin Saudi Arabia said the market was well balanced with prices above $100 a barrel, a level the world's largest exporter has tried to achieve by adjusting production levels over the past two years.

Average Brent crude prices have been relatively stable over the past two years, though they have at times spiked towards $120 and above as supplies from the Middle East have been disrupted by the Arab Spring and as Western sanctions cut Iranian oil exports.

Traders were also awaiting weekly U.S. inventory data, due out late Tuesday and early Wednesday, for market direction. A Reuters poll forecast the data would show a drawdown in crude stockpiles by U.S. refineries during the week to Dec. 14 for year-end tax purposes.

(Reporting by Matthew Robinson and Robert Gibbons in New York; Shadia Nasralla and David Sheppard in London; Manash Goswami and Ramya Venugopal in Singapore; editing by Jim Marshall)