Oil held steady near $77.50 on Wednesday, as rising stock markets and a forming Atlantic storm countered mixed U.S. inventories and disappointing housing data.

U.S. crude for September, the front month-contract after Tuesday's expiry of August, shed 10 cents to $77.48 a barrel at 12:06 a.m. ET. ICE Brent fell 14 cents to $76.08.

Asian equities rose on Wednesday, with Indonesia's benchmark index at a record high, on the back of Wall Street gains prompted by speculation that Fed Reserve Chairman Ben Bernanke may suggest steps to spur lending in testimony to U.S. lawmakers later in the day. .T

But some of the price signals for the physical oil markets were at loggerheads with the upbeat equity outlook.

U.S. crude inventories fell a smaller-than-expected 241,000 barrels in the week to July 16, according to weekly industry data from the American Petroleum Institute (API) published late on Tuesday.

U.S. products demand is still relatively week, said Serene Lim, a Singapore-based oil analyst at ANZ.

Government statistics expected to show the nation's crude stockpiles dropped by 1.4 million barrels will follow from the Energy Information Administration at 10:30 a.m. ET.

For distillate fuels including heating oil and diesel, the average forecast was for an increase of 1.7 million barrels, extending gains to the eighth straight week, a Reuters poll showed. For gasoline, stocks could have risen 900,000 barrels. That would be the fourth consecutive week stocks have increased.


On a possibly more bullish note, the U.S. National Hurricane Center said a tropical depression or a tropical storm had a 60 percent chance of forming near Puerto Rico and Hispaniola within the next two days with a potential track toward the oil-rich Gulf of Mexico.

The center has forecast this year's Atlantic storm season may be the most intense since 2005, when hurricanes Katrina and Rita nearly paralyzed U.S. oil output and refining along the Gulf coast.

Investors have been pricing in this potential storm threat, and the market has been helped by U.S. equities. The earnings season seems favorable, except for a few disappointments from Goldman and IBM, Lim said.

Wall Street shrugged off disappointing reports from Goldman Sachs Group Inc (GS.N) and International Business Machines Corp (IBM.N) and bounced from early lows to end in positive territory on Tuesday. Data showing U.S. housing starts fell more than expected in June to the lowest level in eight months had also dampened markets earlier.

Oil prices have been stuck in a range between $71 and $80 for more than six weeks, squeezed by a crude market that is slowly tightening and weaker U.S. and Chinese macroeconomic indicators.

BP Plc (BP.L) (BP.N) rejected a Times of London report on Wednesday that chief executive Tony Hayward was to step down within the next 10 weeks.

(Editing by Ed Lane)