* U.S. crude stocks drop sharply last week - EIA
* U.S. gasoline futures hit highest since May 1
* Supply concerns persist due to Iran dispute, Syria tension
* Coming up: U.S. jobless claims, 8:30 a.m. EDT Thursday (Adds detail paragraphs 11,14-15)
By Robert Gibbons
NEW YORK, Aug 22 (Reuters) - Oil prices rose on Wednesday as indications the Federal Reserve is likely to provide more stimulus and a sharp drop in U.S. crude inventories countered concerns about Europe’s debt crisis.
Brent and U.S. oil futures turned higher after minutes from the most recent Federal Reserve policy meeting indicated the U.S. central bank is likely to deliver another round of monetary stimulus “fairly soon” unless the economy improves considerably.
“The implication is that it will require more units of a degraded asset (U.S. dollar) to purchase hard assets like oil,” said Michael Fitzpatrick, editor in chief at industry newsletter Energy Overview in New York.
Dollar-denominated commodities can receive a boost from a weak U.S. currency, and the dollar suffered losses after the Federal Reserve news.
U.S. crude oil inventories fell 5.41 million barrels last week, according to a weekly report from the Energy Information Administration (EIA), much more than the anticipated drop of 400,000 barrels and providing a boost to crude futures.
The EIA report was in line with the 6.0-million-barrel inventory slide reported by industry group the American Petroleum Institute on Tuesday.
The center of Tropical Storm Isaac was approaching the Caribbean and expected to become a hurricane, lending support to oil futures because it could threaten U.S. energy production in the Gulf of Mexico.
Oil gains were limited by investor caution as Greek Prime Minister Antonis Samaras began a series of bilateral talks with the leaders of France, Germany and the euro zone this week, as Greece seeks more time to implement reforms required to continue getting help paying debt.
Brent October crude rose 27 cents to settle at $114.91 a barrel, after recovering from a $113.53 low. The $115.27 session peak was below Tuesday’s $115.58 intraday high.
An upcoming maintenance-related slide in North Sea oil production and heightened Middle East tensions helped Brent hit a three-month peak at $117.03 last Thursday as its September contract headed to expiration and went off the board at $116.90 a barrel, the highest settlement since May 2.
Brent has recovered from a low of $88.49 posted on June 22 after retreating from the 2012 peak at $128.40 hit on March 1.
U.S. October crude, in front-month position after the September contract went off the board on Tuesday, rose 42 cents to settle at $97.26 a barrel, above the 200-day moving average of $96.74 and the highest settlement since May 7.
U.S. crude reached $97.54 during the session, within reach of Tuesday’s front-month session peak of $97.60 which was the highest intraday price since $97.69 on May 10.
Total crude trading volume remained stuck in the summer doldrums, with Brent and U.S. crude turnover less than half a million lots traded and below their 30-day averages.
U.S. heating oil futures managed a slight gain, and gasoline futures settled almost 4 cents higher. Front-month September gasoline’s peak of $3.1154 a gallon, reached in post-settlement trade, was the highest price since May 1.
The violent struggle in Syria and tensions over the dispute over Iran’s nuclear program continued to raise the specter of potential supply disruptions in the region.
The United Nations said Iran appears to be supplying Syria with weapons, as the 17-month uprising against Syrian President Bashar al-Assad drags on.
The chief of the U.N.’s International Atomic Energy Agency played down the chances of a breakthrough when talks with Iran resume on Friday, but said the agency would pursue access to the key Parchin military site that diplomats say may have been cleansed of evidence of illicit nuclear activity. (Additional reporting by Peg Mackey in London and Ramya Venugopal and Elizabeth Law in Singapore; Editing by Dale Hudson, Alden Bentley and Marguerita Choy)