* API reports rise in U.S. fuel inventories, drop in crude
* Expectations of rising U.S. production weigh
* Nigeria's Niger Delta Avengers threaten oil sector attacks
* U.S. EIA supply report due at 1600 GMT (Updates prices, adds analyst quote, previous SINGAPORE)
LONDON, Jan 18 (Reuters) - Oil held steady above $69 a barrel on Thursday, supported by falling inventories of crude and threats of an attack on Nigeria's petroleum industry, although a reported rise in U.S. fuel supplies weighed.
Crude is within sight of its highest since December 2014, supported by supply cuts led by the Organization of the Petroleum Exporting Countries and concern that unrest in producer nations such as Nigeria could further curb output.
Militant group Niger Delta Avengers threatened to attack Nigeria's oil sector in the next few days, potentially hampering supplies in Africa's largest exporter.
"The impact of such a threat, if carried out, would be significant on the global supply and demand balance," said Tamas Varga of oil broker PVM. "The market is still sensitive to geopolitical developments."
Brent crude, the global benchmark, had slipped 7 cents to $69.31 by 0943 GMT. On Monday it hit $70.37, the highest since December 2014. U.S. crude was up 2 cents at $63.99 and reached its highest since December 2014 on Tuesday.
A supply report from the American Petroleum Institute on Wednesday presented a mixed picture, with inventories of gasoline and diesel rising and crude stocks falling. The U.S. government's weekly supply data is due on Thursday.
Brent has risen from $61 a barrel in early December and some analysts say the rally may be about to run out of steam.
"The upside is now limited for oil prices," said Fawad Razaqzada, market analyst at brokerage Forex.com. "U.S. oil producers will ramp up production in the coming months."
The U.S. Energy Information Administration (EIA) said on Tuesday it expects U.S. oil output to continue to rise in February with production from shale increasing by 111,000 barrels per day (bpd).
The agency previously said U.S. output could reach 10 million bpd in February and 11 million bpd in 2019.
Even so, traders said prices were unlikely to fall far due to the OPEC-led curbs and the risk of further disruptions.
(Additional reporting by Henning Gloystein; Editing by Dale Hudson)