* White House to host budget talks with congressional leaders
* U.S. crude stocks slip, products stocks up last week-EIA
* Middle East turmoil remains supportive to oil
* Coming up: CFTC positions data 3:30 p.m. EST Friday
(Recasts with updated prices, market activity; changes byline and dateline, pvs LONDON)
By Robert Gibbons
NEW YORK, Dec 28 (Reuters) - Oil prices eased in choppy trading on Friday after government data showed U.S. fuel stockpiles rose sharply and crude stocks fell less than expected last week.
Crude futures had edged up ahead of the oil inventory data as investors awaited a White House meeting later on Friday where lawmakers will try to cut a budget deal to avert looming automatic tax hikes and spending cuts that many fear will push the economy into recession.
"All eyes are on Washington, where the president and congressional leaders are scheduled to meet ... to try and hammer out a deal that avoids the so-called 'fiscal cliff,' Addison Armstrong, senior director for market research at Tradition Energy, said in a research note.
Oil prices have been buffeted recently as investors gauge the likelihood that tax increases and lowered spending set to take effect on Jan. 1 will be avoided by a last-minute agreement before the end of 2012.
Brent and U.S. crude futures were on pace to post weekly gains, but while Brent nears a full-year increase of about 3 percent, its smallest in four years, U.S. crude is on track to end 2012 down more than 7 percent.
Approaching the new year, potential threats to Middle East oil supplies from ongoing turmoil in the region have kept oil bolstered, along with signs of a rebound in China's economic growth and more traction in the U.S. economic recovery.
Brent February crude
Brent's $109.83 session low tested support below the 200-day moving average at $109.94.
U.S February crude was down 14 cents at $90.73 a barrel, having traded as low as $90.32, below the 100-day moving average of $90.63. The $91.49 session peak was the highest front-month crude price since October.
U.S. OIL INVENTORIES
U.S. crude oil inventories fell, but only by 586,000 barrels, in the week to Dec. 21, the Energy Information Administration said on Friday.
The crude stocks drop was less than the drop of 1.9 million barrels expected in a Reuters survey of analysts.
While crude stockpiles slipped, distillate stocks jumped 2.42 million barrels and gasoline inventories rose 3.78 million barrels.
Distillate stocks were expected to be down 900,000 barrels, while the gasoline stocks build exceeded the expected rise of 500,000 barrels, and the product builds occurred even with refinery capacity utilization dropping 1.2 percent.
The rising product stockpiles hemmed in U.S. January heating oil
Heating oil was down 1.53 cents at $3.0570 a gallon, back below the 100-day moving average at $3.0781 after reaching a session high of $3.0829.
Gasoline was down 1.08 cents at $2.8105 a gallon, with the $2.8383 session peak having failed to threaten the 100-day moving average at $2.8429.
MIDDLE EAST UNCERTAINTY
Syria's opposition leader rejected an invitation from Russia for peace talks with Syrian President Bashar al-Assad's government to end the civil war.
The West's dispute with Iran over Tehran's nuclear program continues to simmer as Iran on Friday began six days of naval drills in the Strait of Hormuz, the region's vital oil shipping route.
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Fiscal cliff woes impact:
Brent 3-mth chart analysis:
US crude 3-mth chart:
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(Additional reporting by Jessica Jaganathan in Singapore and Dmitry Zhdannikiov in London; Editing by Kenneth Barry)
((robert.gibbons@thomsonreuters.com)(+1 646 223 6059)(Reuters Messaging: robert.gibbons.reuters.com@reuters.net))
Keywords: MARKETS OIL/
