By Barani Krishnan
NEW YORK (Reuters) - Oil prices rose on Tuesday on data showing the U.S. economy grew at its fastest rate in 11 years, supporting expectations of greater demand for crude.
Crude markets were also supported by expectations for lower U.S. inventories in preliminary data for the week to Dec. 19 due from the American Petroleum Institute (API).
But thinner-than-usual volumes ahead of Christmas and the year-end holidays meant that any move higher or lower was likely to be exaggerated, analysts said.
The Commerce Department earlier Tuesday revised up its estimate of U.S. gross domestic product growth in the third quarter to a 5.0 percent annual pace, citing stronger consumer and business spending than it had previously assumed.
It was the fastest growth pace since the third quarter of 2003. The Commerce Department previously pegged third-quarter growth at an annual rate of 3.9 percent. Economists polled by Reuters expected growth would be revised upwards to a 4.3 percent pace.
U.S. stocks surged, with the Dow and S&P 500 building on a four-day rally to set new intraday records, on the data. [.N]
"The revised GDP growth of 5 percent is certainly encouraging demand expectations in the U.S. and giving crude some support," said Phil Flynn, analyst at Chicago's Price Futures Group.
"But since we also have API data today, and since volumes are thin heading into the holidays, I'll be wary of holding on to this relative strength till the close," he added.
U.S. commercial crude oil and products inventories were forecast to have fallen by 2.6 million barrels last week, according to a Reuters poll ahead of the API data at 4:30 p.m. ET. [EIA/S]
Benchmark Brent oil
Brent has almost halved in value over the past six months as high quality crude from North America overwhelmed demand. It hit 5-1/2 year lows of $58.50 last week.
U.S. crude
Ehsan ul-Haq, senior market consultant at KBC Energy Economics, was pessimistic of the market's resilience, saying U.S. growth alone could not help oil.
"I hate the expression, but this might be a dead-cat bounce. I think prices will restart their downward journey in January if not at the end of December."
(Additional reporting by Christopher Johnson and Henning Gloystein in Singapore; Editing by William Hardy and W Simon)
