UPDATE 6-U.S. oil down for 4th day, gasoline up on refinery fire
* Fire at Lemont, Illinois refinery boosts gasoline
* China HSBC flash PMI hits 7-month high in Oct
NEW YORK, Oct 24 (Reuters) - U.S. oil futures fell on Thursday for the fourth straight session, weighed down by rising inventories while gasoline futures got a boost from a refinery fire in Illinois.
RBOB gasoline futures rebounded off 16-month lows following news of a fire at the crude unit of Citgo's 174,5000 barrel per day Lemont, Illinois refinery. High stockpiles following a summer of strong runs by refineries and the seasonal drop in demand have weighed on gasoline prices.
"The market kind of picked its head up," said Gene McGillian, analyst with Tradition Energy in Stamford, Connecticut about the impact of the fire.
"One of the things we haven't really seen during refinery maintenance is problems with refineries."
The rest of the oil complex fell on expectations seasonal refinery maintenance in the world's top oil consumer would continue to dampen demand for crude. Inventories last week hit the highest level since June, according to government data.
While selling was not as heavy as in the previous session, U.S. prices touched a fresh four-month low. International benchmark Brent crude fell for a second straight session.
The U.S. crude oil benchmark, also known as West Texas Intermediate or WTI, shed 50 cents to $96.36 a barrel by 11:37 a.m. EDT (1537 GMT), after touching a four-month low of $95.95. U.S. crude settled at its lowest point since July 1 in the previous session.
Brent crude oil was down 50 cents to $107.30 a barrel, after settling at its lowest level since Aug. 8 on Wednesday.
European Brent's premium over U.S. oil , which briefly moved above $13 a barrel on Wednesday, its widest in six months, traded just below $11 a barrel after narrowing in the previous session.
U.S. gasoline futures gained 1.61 cents to $2.568 a gallon after dipping to fresh 16-month low of $2.5417 a gallon earlier in the session. Heating oil traded down to a three month-low of $2.8974 a gallon.
Losses were somewhat stemmed by a preliminary survey showing China - the world's second-largest oil consumer - posted the fastest growth in its manufacturing sector in seven months in October.
The Markit/HSBC Purchasing Managers Index (PMI) for China stood at 50.9 in October, above September's final reading of 50.2 and boosting the outlook for global oil demand.
Lingering uncertainty over the future of Scotland's Grangemouth refinery lent some support to Brent. Union leaders said they had accepted demands from Switzerland-based Ineos that may help avert closure of the refinery and nearby petrochemical plant.
Grangemouth, which supplies most of Scotland with fuel, provides steam to a plant that processes Forties, the largest crude oil stream underpinning Brent futures.
The oil market was also eyeing talks between the United States and Iran, to see when and if sanctions might be lifted. Washington described last week's negotiations as the most serious and candid to date, and the parties have agreed to meet again in Geneva on Nov. 7-8.
Any relaxation of the sanctions against OPEC member Iran could push down oil prices.