Oil edges up on China stimulus hopes, US inventory drop

API shows US crude stocks fall 3.2 million barrels, sources say

China to ramp up fiscal support for consumption next year

Coming up: EIA supply report on Friday

Updates prices, previous SINGAPORE

By Emily Chow and Alex Lawler

SINGAPORE/LONDON, Dec 26 (Reuters) - Oil edged higher on Thursday in thin holiday trade driven by hopes for additional fiscal stimulus in China, the world's biggest oil importer, and supported by an industry report showing a decline in U.S. crude inventories.

Chinese authorities have agreed to issue 3 trillion yuan ($411 billion) worth of special treasury bonds next year, Reuters reported on Tuesday, citing two sources, as Beijing ramps up fiscal stimulus to revive a faltering economy.

Brent crude futures LCOc1 rose 39 cents, or 0.5%, to $73.97 a barrel by 0917 GMT. U.S. West Texas Intermediate crude CLc1 was at $70.46, up 0.5%, or 36 cents, from Tuesday's pre-Christmas settlement.

"Crude oil prices have risen this week, driven by news that Chinese authorities are implementing a record-breaking 3 trillion yuan fiscal stimulus to boost their struggling economy," said Priyanka Sachdeva, senior market analyst at Phillip Nova.

"Additionally, a decrease in U.S. crude oil inventories, which indicates healthy demand, has also supported prices."

Satoru Yoshida, a commodity analyst at Rakuten Securities, said expectations of increasing fossil fuel production and demand after U.S. President-elect Donald Trump takes office next month are also bolstering oil prices.

The latest weekly report on U.S. inventories, from the American Petroleum Institute industry group, showed crude stocks fell last week by 3.2 million barrels, market sources said on Tuesday. API/S

Traders will be waiting to see if the official inventory report from the Energy Information Administration confirms the decline. The EIA data is due at 1 p.m. EST (1800 GMT) on Friday, later than normal because of the Christmas holiday.

Analysts in a Reuters poll expect crude inventories fell by about 1.9 million barrels in the week to Dec. 20, while gasoline and distillate inventories are seen falling by 1.1 million barrels and 0.3 million barrels respectively. EIA/S

($1 = 7.2975 Chinese yuan renminbi)

(Additional reporting by Yuka Obayashi in Tokyo and Emily Chow in Singapore; Editing by Alexandra Hudson)

((alex.lawler@thomsonreuters.com))