UPDATE 4-Oil near $109 on Fed hopes, U.S. fuel stocks seen falling
* U.S. crude above $100 on cold weather, tapering hopes
* Coming up: Yellen's testimony at 1330 GMT, hearing at 1500 GMT
* API weekly U.S. inventory report, 2130 GMT
LONDON, Feb 11 (Reuters) - Oil edged towards $109 a barrel on Tuesday on hopes the Federal Reserve's new head will strike a cautiously optimistic tone on the U.S. economy and on expectations U.S. distillate stocks fell as cold weather boosted heating demand.
Fed Chairwoman Janet Yellen testifies to lawmakers later on Tuesday and, say economists, will want to reinforce the central bank's determination to halt the money-printing presses later this year while ensuring investors that a rise in interest rates remains a long way off.
Brent crude was up 17 cents at $108.80 a barrel at 1304 GMT, after settling 94 cents lower. U.S. crude traded up 9 cents at $100.15, having closed above $100 on Monday for the first time this year.
"If Yellen, as expected, gives a dovish testimony, it will give some assurance to oil markets," said Chee Tat Tan, investment analyst at Phillip Futures in Singapore. "The greenback would be likely to weaken further, which would help lift demand for crude oil."
The dollar fell to its lowest in almost two weeks on Tuesday
Yellen's prepared testimony on the Fed's semiannual monetary policy report will be released at 1330 GMT. The hearing before the House of Representatives Financial Services Committee starts at 1500 GMT.
Some analysts say investor hopes for the Fed chief's comments may be running a little too high, and are looking for oil prices to retreat soon afterwards.
"The market may be getting a little bit ahead of itself in terms of what can be expected from Janet Yellen's testimony," said Harry Tchilinguirian, head of commodity markets
strategy at BNP Paribas.
"From a technical point of view, sustaining the move past $100 for WTI is going to be difficult."
U.S. crude was close to a six-week high, supported by expectations of a drop in distillate inventories last week due to freezing weather across the country.
Distillate stocks, including heating oil and diesel fuel, are expected to drop by 2.3 million barrels in the week to Feb. 7, analysts said in a Reuters survey before weekly inventory reports from the American Petroleum Institute and the Energy Information Administration.
U.S. crude oil inventories, however, are expected to rise by 3 million barrels. The API releases its data at 2130 GMT, while the EIA report is out on Wednesday.
Brent's gains were capped by expectations of a further increase in Libyan output. The North African nation's current production is around 600,000 barrels per day (bpd), up from its average rate in January.
(Reporting by Jacob Gronholt-Pedersen and Alex Lawler; editing by Keiron Henderson)