UPDATE 3-Brent slips to near $108 ahead of Fed stimulus decision
* U.S. crude stocks drop 2.5 mln bbls, gasoline, distillates also fall -API
* Dollar on the defensive as U.S. Fed verdict on stimulus looms
* Coming Up: Federal Reserve chairman briefing; 1930 GMT
(Recasts, updates throughout, changes dateline from previous SINGAPORE)
LONDON, Dec 18 (Reuters) - Brent oil futures slipped toward $108 a barrel on Wednesday with investors reluctant to lock in positions ahead of a U.S. Federal Reserve policy decision on a plan to trim its monetary stimulus.
Fed Chairman Ben Bernanke is expected to give details later in the day on when the U.S. central bank may start to reduce its $85 billion-a-month bond-buying programme which has underpinned global assets including commodities and restrained the dollar in recent years.
Brent crude fell 31 cents to $108.13 by 1015 GMT, after settling nearly $1 lower on Tuesday. U.S. oil fell 11 cents to $97.11, after ending 26 cents lower.
"Today the market will focus on the FOMC's (Federal Open Markets Committee) December policy statement where any dollar bullish sentiment would add to Brent's downside," said VTB Capital analyst Andrey Kryuchenkov.
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, many investors think any tapering will happen next year.
"I think Bernanke might give a clear indication on tapering. If he doesn't do it today, when will he? The data has improved and therefore there is no reason not to do it," said Michael Hewson, analyst at CMC Markets.
US STOCKS, SPREAD
U.S. oil was supported from demand growth hopes at the world's largest oil consumer after industry data showed a fall in crude stockpiles.
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.
Investors now await data from the U.S. Energy Information Administration (EIA) for 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".
(Additional reporting by Manash Goswami in SINGAPORE; editing by Jason Neely)