TOKYO, Aug 20 (Reuters) - Japan's Nikkei stock average is likely to drift narrowly on Thursday, supported by gains in U.S. stocks but with investors keeping a nervous eye on China a day after shares there fell to a two-month low.
Oil and gas field developer Inpex and other energy shares are likely to be strong after oil surged more than 4 percent after U.S. government data showed a steep drop in crude imports and inventories.
The surprising drop in stockpiles sent Wall Street edging up on hopes that it could suggest an improving demand outlook and rekindled recovery hopes.
"Though we're likely to get a little support from the fact that U.S. stocks have closed higher for two days, the yen is a bit stronger, and investors will continue to watch China," said Hiroichi Nishi, general manager at the equity division of Nikko Cordial Securities.
"Given that the world is looking to Asia and China in particular to lead it out of recession, any downward fluctuations there are a keenly watched concern."
Analysts said that while downward moves in the benchmark Nikkei are unlikely to be anything more serious than a bit of natural adjustment after strong gains, there is a sense that the market has been overbought.
Support is expected around 10,100, which is roughly where the Nikkei's 25-day moving average comes in.
The Nikkei is likely to move between 10,100 and 10,300, with energy and materials stocks likely to be strong, analysts said. The Nikkei closed at 10,204.00 on Wednesday, its lowest close since late July.
Nikkei futures traded in Chicago rose 0.8 percent from the Osaka close of 10,210, hinting at a higher open. STOCKS TO WATCH
-- Tokyo Electron Ltd, other chip gear makers
Orders for Japanese equipment used to make semiconductors outpaced sales for the fourth straight month in July as the chip sector inches out of its worst-ever downturn, industry data showed on Wednesday.
-- Nomura Real Estate Office Fund
Nomura Real Estate Asset Management said the two real estate investment trusts it manages may raise up to 50 billion yen ($528 million) via a new share issue amid signs of a recovery in the domestic REIT market.
The asset management company runs the Nomura Real Estate Office Fund, the fourth-largest of Japan's 41 listed REITs, and the Nomura Real Estate Residential Fund, which has 139 apartment buildings in its portfolio.
-- Sony Corp
Sony will boost its joint parts purchases with Sony Ericsson Mobile Communications AB to cut costs and help the struggling cellular phone joint venture, the Nikkei business daily said. (Reporting by Elaine Lies; Editing by Chris Gallagher)