* China promises further economic support
* Coming up: EIA oil data 10:30 a.m. EDT Wednesday
By Robert Gibbons
NEW YORK, July 31 (Reuters) - Oil prices fell for a second straight day o n T uesday on expectations that any central bank stimulus may be insufficient to revive economic growth, even as hopes dimmed that the U.S. Federal Reserve will act this week to boost the economy.
Supportive data from the United States, including higher home prices, improved consumer confidence and Midwest business activity, was seen as lowering the chance of more stimulus from the Fed when its two-day policy meeting ends Wednesday.
"Oil prices are lower on the paradox of slightly better economic data in the form of the Chicago PMI and the consumer confidence reading," said John Kilduff, a partner at Again Capital LLC in New York.
"The slightly positive readings may keep the Fed from acting as fully as the markets have priced in. Also, the comments from various German leaders have taken away some the expectations for ECB action," Kilduff added.
Even with two days of losses, Brent crude ended July up 7.28 percent for the month, snapping a string of three monthly declines, as revived tensions over Iran's dispute with the West about Tehran's nuclear program and North Sea oil production problems supported crude prices.
U.S. crude posted a 3.65 percent monthly gain, ending a two-month streak of declines.
Brent September crude fell $1.28 to settle at $104.92 a barrel, then dropped to $104.10 in post-settlement trade.
U.S. September crude slumped $1.72 to settle at $88.06 a barrel, then dropped as low as $87.31 in post-settlement trade.
Total crude trading volumes remained lackluster, with dealings for Brent and U.S. crude lagging 30-day averages.
U.S. gasoline and heating oil futures also ended lower as the front-month August contracts expired.
U.S. OIL INVENTORIES
Crude futures pared losses after industry group the American Petroleum Institute reported U.S. crude stocks fell a staggering 11.6 million barrels in the week ended July 27, a far bigger drop than expected, as imports fell nearly 800,000 barrels per day.
Crude stocks at the Cushing, Oklahoma, hub fell 1.4 million barrels, but most of the stock drop occurred in the PADD 3, Gulf Coast, region, where stocks fell 8.483 million barrels.
Gasoline stocks fell 1.3 million barrels and distillate stocks fell 1.4 million barrels, the API said.
Crude oil stocks were expected to have fallen only 700,000 barrels, a Reuters survey of analysts taken ahead of the weekly reports showed.
Gasoline stocks were seen up 1.0 million and distillate stockpiles were expected to be up 1.1 million barrels.
The U.S. Energy Information Administration's weekly report follows at 10:30 a.m. EDT (1430 GMT) on Wednesday.
Slowing growth in the United States, the world's top oil consumer, has fueled expectations of stimulus measures from the Federal Reserve, which started a two-day policy meeting on Tuesday, although caution about the likelihood the Fed will act immediately was evident as the meeting neared.
Last week's statement by European Central Bank President Mario Draghi that the ECB would do whatever it takes within the bank's mandate to protect the euro raised expectations of new policy measures to address the debt crisis when the ECB meets on Thursday.
Germany's finance minister on Tuesday reiterated its view that there is no need to grant a banking license to the euro zone's new bailout fund. Such a move could enable the fund to buy large amounts of debt issued by troubled euro zone economies.
Oil received support early after a pledge by leaders in China to increase fiscal and monetary support to the economy in the second half of the year.
MIDDLE EAST UNCERTAINTY
Investors remained concerned about tensions between the West and Iran over Tehran's nuclear program and the violence in Syria, even as the global economy has the spotlight.
U.S. Secretary of Defense Leon Panetta denied media reports on Tuesday that he would discuss possible military attack plans against Iran during a brief visit to Israel.
President Barack Obama announced new U.S. sanctions against foreign banks that help Iran sell its oil, hoping to add pressure on Tehran a day before congressional votes on new sanctions.
Syrian combat aircraft and artillery pounded two areas of Aleppo as the army battled for control of the country's biggest city, but rebel fighters said troops loyal to President Bashar al-Assad had been forced to retreat. (Additional reporting by Gene Ramos in New York, Peg Mackey in London and Luke Pachymuthu in Singapore; Editing by Bob Burgdorfer and Alden Bentley)
Source: Reuters
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