UPDATE 1-Brent holds above $108 ahead of Fed decision on stimulus
* U.S. crude stocks drop 2.5 mln bbls, gasoline, distillates also fall - API
* U.N. told up to 500 killed in South Sudan clashes -diplomats
* Dollar on defensive as US Fed verdict on stimulus looms
* Coming Up: Federal Reserve Chairman's briefing; 1930 GMT
(Adds comments, details on Brent/WTI spread; updates prices)
SINGAPORE, Dec 18 (Reuters) - Brent futures held steady above $108 a barrel on Wednesday after sliding the previous day, with investors reluctant to lock in positions ahead of a U.S. Fed briefing that is expected to shed light on a plan to taper its monetary stimulus.
Chairman Ben Bernanke is expected to give details later in the day on when the Fed may start to reduce its $85 billion-a-month bond-buying programme, a major factor that has underpinned riskier global assets including commodities and restrained the dollar in recent years. Oil, particularly the U.S. benchmark, also drew support from a likely fall in U.S. crude stocks.
Brent crude fell 1 cent to $108.43 a barrel by 0549 GMT, after settling nearly $1 lower. U.S. oil rose 14 cents to $97.36, after ending 26 cents lower.
"In less than 12 hours, we will know about the definitive action the Fed plans to take on its easing programme. Oil and a lot of other markets will take their cues from the comments," said Ben Le Brun, a market analyst at OptionsXpress in Sydney. "Nobody is on the front foot or the back foot at the moment."
Although a steady run of firm U.S. economic data in recent weeks has raised speculation the Fed could reduce its bond buying at its policy meeting ending later in the day, a majority of investors still think any tapering will happen next year.
Apart from oil, Asian shares and gold held firm on Wednesday, while the dollar weakened.
"My personal view is that we may get some form guidance on when the Fed may start to taper its stimulus," Le Brun said. "There is nothing to make the Fed rush at the moment. They are likely to play it very, very safe."
Oil is also drawing support from demand growth hopes at the world's largest oil consumer after industry data showed a fall in crude stockpiles.
Crude inventories fell by 2.5 million barrels in the week to Dec. 13 to 367.8 million barrels, data from industry group the American Petroleum Institute showed, compared with analysts' expectations for a decrease of 2.3 million barrels.
US STOCKS, SPREAD
Investors are now awaiting data from the U.S. Energy Information Administration (EIA) to get a clearer picture of the country's demand outlook.
Expectations of a fall in U.S. crude inventories are supporting the U.S. benchmark while easing demand because of refinery shutdowns in France are weighing on Brent, narrowing the difference between the two. The spread ended at its narrowest since early November, under $11 a barrel. CL-LCO1=R>
"WTI crude oil prices found more support on expectations the US commercial crude inventories would show another decline, after two weeks where the extent of drawdowns has surprised the market," analysts at ANZ said in a note. "Weaker demand for Brent is likely to have pressured prices, with French refinery workers striking."
Markets are also watching if tensions in South Sudan will worsen. The United Nations received reports that between 400 and 500 people had been killed and up to 800 wounded in the latest violence, and the government said it had arrested 10 politicians in connection with a "foiled coup".
(Editing by Muralikumar Anantharaman)