UPDATE 8-Oil prices choppy, dollar weighs, spreads active
* Action in oil products, Brent/WTI spread trade
* Libya's major Sharara oilfield to resume operations
* U.S. crude oil stocks likely fell for 2nd week-poll
* Coming Up: API stocks data at 4:30 p.m. EDT
(Adds details on spread trades, EIA oil demand outlook. Updates prices.)
NEW YORK, July 9 (Reuters) - U.S. crude oil prices were moderately higher in choppy trade on Tuesday afternoon in New York, as gains fueled by a stock market advance were limited by a strong U.S. dollar.
Movements in the straight Brent and WTI futures contracts were lackluster in thin volume, and much of the action was seen in spread trading between the two benchmarks and between oil products, one analyst said.
Brent crude oil futures were 3 cents higher at $107.46 at 1:24 p.m. EDT (1724 GMT), after slipping to a session low of $106.85. U.S. crude oil futures were 11 cents higher to $103.25, recovering from a low of $102.31.
Improved global supplies and fears that further violence in Egypt could ignite conflict in the broader Middle East were underpinning Brent, which was also bouncing between moderate gains and losses.
Egypt's interim rulers, aiming to defuse a tense situation after 51 people were killed in violence on Monday, issued a faster-than-expected timetable for elections to try and drag the country out of crisis.
Highlighting the fragile situation in other parts of the Middle East, which pumps a third of the world's oil, 53 people were wounded by a car bomb blast in Beirut's southern suburbs on Tuesday.
The U.S. dollar index hit a fresh three-year high against a basket of currencies, creating headwinds for oil prices. A good start to the U.S. earnings season underpinned equities, which supported crude oil prices.
Commodities priced in dollars become more expensive for holders of other currencies as the dollar strengthens, weakening demand.
The spread between U.S. gasoline futures and heating oil <1RB-HOQ3> had narrowed to a near one-month high, reflecting the need for traders to square positions after the previous session, Walter Zimmermann, chief technical analyst for United-ICAP, said.
On Monday, gasoline futures rallied to seven-week high while heating oil hit a more than three-month high at $3.00 a gallon.
"RBOB really got hit hard relative to distillate yesterday but has gained all of it back," Zimmermann said. Gasoline futures were 0.88 percent higher, and heating oil was flat.
The spread between global benchmark Brent crude oil and U.S. benchmark West Texas Intermediate <CL-LCO1=R> had levelled out to around $4.15 to $4.30 per barrel after narrowing to $3.09 last Wednesday.
Improved supply from elsewhere in the Middle East helped push Brent oil prices lower for now. Libya's major Sharara oilfield will resume operations, and the flow of crude from Kirkuk in Iraq to the port of Ceyhan in Turkey will resume in two to three days after being interrupted for weeks due to a pipeline leak.
In the United States, traders awaited supply inventory data expected to show a decline in crude oil stocks.
The U.S. Energy Information Administration slightly tightened its 2014 oil demand outlook but left the balance of the year unchanged.
(Additional reporting by Simon Falush in London and Jessica Jaganathan in Singapore; Editing by James Jukwey, Susan Fenton, David Evans and Chris Reese)