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UPDATE 4-Oil steady after drop in fuel stocks stokes demand hopes

* Big drop in gasoline, diesel stocks lifts refinery margins

* Brent, WTI futures held below $50 a barrel

* U.S. crude stocks, high OPEC supplies pressure market

* Analysts says rising political risk could help oil prices (Updates throughout, changes dateline previous SINGAPORE)

LONDON, July 20 (Reuters) - Oil prices were steady on Thursday, holding gains made the previous session after falling U.S. crude and oil product inventories lifted the market.

Brent crude futures, the international benchmark for oil prices, stood at $49.72 per barrel at 0939 GMT, 2 cents up from their last settlement.

U.S. West Texas Intermediate (WTI) crude futures were at $47.10 per barrel, 2 cents below their last close.

Prices for both rose more than 1.5 percent in the previous session on a report showing U.S. crude and fuel inventories fell last week.

U.S. crude inventories dropped by 4.7 million barrels in the week to July 14, according to data from the Energy Information Administration, more than the analyst forecast of a 3.2 million-barrel decrease.

Gasoline stocks fell by 4.7 million barrels, well above expectations for a 655,000-barrel drop. Middle distillate inventories fell by 2.1 million barrels, versus expectations for a 1.2 million barrels increase.

"The marked reduction in gasoline and distillate stocks drove crack spreads to multi-month highs, which points to high crude oil processing and a further inventory reduction in the coming weeks," Commerzbank said in a note.

But Brent crude prices have still not been able to breach the $50-per-barrel mark since early June amid concerns about high stocks and rising output despite cuts by the Organization of the Petroleum Exporting Countries and other producers.

U.S. oil stock levels, at roughly 490 million barrels, remain well above the five-year average, while U.S. production <C-OUT-T-EIA> has increased by almost 12 percent since mid-2016 to 9.4 million barrels per day (bpd).

Output from OPEC members Libya and Nigeria, which were exempt from OPEC-led cuts regime, has added to the surplus.

"Brent is likely to have trouble rising above the $50 mark, as crude oil production in the U.S. and in Libya is further increasing at the same time," Commerzbank said.

OPEC and non-OPEC producers are to meet in St. Petersburg, Russia on Monday to discuss oil markets. OPEC and its non-OPEC allies, including Russia, have pledged to cut production by 1.8 million bpd from January this year to the end of March 2018.

A lack of compliance by some and the two exemptions have undermined the rebalancing effort, capping prices.

But analysts said rising political risk, including potential U.S. sanctions on Venezuela and tensions in the Middle East and North Africa, could provide some support to oil prices.

"We don't expect to see this quietness to last forever, as geopolitical risks are rising again," ANZ bank said in a note. (Additonal reporting by Fergus Jensen and Henning Gloystein in Singapore; Editing by Edmund Blair)