UPDATE 8-Oil edges up on Mideast tensions, trade optimism

* U.S. sees signs Iran or allies may be planning more
attacks
* Dollar recovers from six-month low after year-end sell-off
* Brent to hold near $63 in 2020, WTI around $57 - poll
* U.S. crude stocks fell by 7.8 mln bbls last week - API

(New throughout, updates prices, market activity and comments
to settlement)
By Laila Kearney
NEW YORK, Jan 2 (Reuters) - Oil inched up on Thursday on
rising tensions in the Middle East and signs of improving
Washington-Beijing trade relations, but a strong U.S. dollar
limited price gains.
Brent crude futures LCOc1 settled at $66.25 a barrel,
gaining 25 cents. U.S. West Texas Intermediate (WTI) crude
CLc1 settled at $61.18, rising 12 cents.
The dollar rose about 0.5% .DXY , recovering from a
six-month low after a downbeat December left thea index
virtually unchanged for 2019. A stronger dollar
makes oil more expensive for holders of other currencies.
Worries that rising tensions in the Middle East could hit
supply outweighed strides in the dollar index.
Turkey's parliament overwhelmingly approved a bill allowing
troop deployment in Libya, paving the way for further military
cooperation between Ankara and Tripoli. It is unlikely to put
boots on the ground immediately. Over the weekend, the U.S. military carried out air strikes
against the Iran-backed Kataib Hezbollah militia group. Angry
protesters then stormed the U.S. Embassy in Baghdad on
Wednesday, although they withdrew after the United States
deployed extra troops.
On Thursday, U.S. Defense Secretary Mark Esper said there
were indications Iran or forces it backs may be planning
additional attacks. "I think everybody is conscious of what's going on in the
Middle East with Iraq and Libya," said John Kilduff, a partner
at Again Capital in New York.
Growing optimism that a trade truce between the world's two
largest economies will support energy demand also supported oil.
U.S. President Donald Trump has said Jan. 15 would mark the
signing of the U.S.-China Phase 1 trade deal.
January also marks the scheduled start of deeper output cuts
by the Organization of the Petroleum Exporting Countries and its
partners, including Russia.
The group agreed to cut output by a further 500,000 barrels
per day (bpd) from Jan. 1, on top of their previous cut of 1.2
million bpd. Russia reported record high 2019 oil and gas condensate
production C-RU-OUT of 11.25 million bpd, beating the previous
record of 11.16 million bpd set a year earlier, Energy Ministry
data showed. A fall in U.S. crude inventories last week also supported
prices. U.S. crude stocks fell 7.8 million barrels in the week
ended Dec. 27, compared with analysts' expectations for a
decrease of 3.2 million barrels, data from the American
Petroleum Institute (API) showed on Tuesday. API/S
Official data from the Energy Information Administration
(EIA) is due on Friday having been delayed by two days by the
New Year's holiday. EIA/S