* French refinery strike limits European demand

* Iraq production hit by bad weather and maintenance

* US crude stocks likely fell 2.5 mln barrels last week -poll

* Oil discoveries drop to lowest since 1952 -IHS (Recasts with latest price move)

By Simon Falush

LONDON, May 24 (Reuters) - Oil reversed early losses to turn positive on Tuesday, as investors awaited crude oil inventory data from the United States that was expected to show a shrinking supply overhang.

Brent futures had gained 26 cents to $48.34 a barrel by 1242 GMT, after closing down 37 cents in the previous session.

U.S. crude futures rose 14 cents to $48.49 a barrel, having settled down 33 cents the day before.

Commercial crude stocks in the United States likely fell by around 2.5 million barrels to 538.8 million in the week ended May 20, a Reuters poll showed.

The American Petroleum Institute releases inventory data later on Tuesday, while figures from the U.S. government's Energy Information Administration are due on Wednesday.

The API is scheduled to release its data at 2030 GMT, while the EIA numbers are due to at 1430 GMT on Wednesday.

"I think the market is preparing for the (U.S.) crude stock data today and tomorrow," said Andy Sommer, senior energy analyst at Axpo Trading in Dietikon, Switzerland.

Oil was stronger earlier in the session, gaining support from a report that Iraq's oil output has reached 4.7 million barrels per day (bpd) and exports are running at a record 3.9 million bpd.

However Falah Alamri, Iraq's OPEC governor and head of the State Oil Marketing Organisation (SOMO), said at a conference in London that a decision to stop production of 170,000 bpd of Kirkuk crude, and the impact of bad weather and maintenance had slowed output.

A meeting of the OPEC exporter group, including Iran, is scheduled for June 2.

Plans for a deal between OPEC and non-OPEC producers to shore up crude prices by freezing output fell apart in April when Saudi Arabia demanded that Iran, its main rival for influence in the region, participate.

A strike in France limited the market's gains by denting crude demand in Europe as refineries were disrupted by pickets.

French police using water cannon and tear gas broke up a strike picket that was blocking access to a large oil refinery in the southern port area of Marseille in a government-versus-union showdown over labor law reforms.

Sommer at Axpo Trading added that gains were likely to be short-lived, and that prices were likely to fall again in the coming weeks.

"There's an ongoing trend of increasing supply. Supply from unplanned outages in Nigeria and Canada are likely to come back," he said, referring to disruption caused in the two countries by protests and wildfires. (Editing by Dale Hudson and David Evans)

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