CORRECTED-UPDATE 7-Oil gains on U.S. data, Brent premium at 8-month low

Tue Mar 26, 2013 10:23am EDT

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(Corrects headline to say premium at 8-month low, not high)

* Brent-U.S. crude spread falls to lowest since July

* U.S. crude at highest in more than a month

* U.S. home sales post biggest rise in 6-1/2 years

* Coming Up: API oil inventory data; 2030 GMT

By Simon Falush

LONDON, March 26 (Reuters) - Oil rose on Tuesday, lifted by strong housing data in the United States, while Brent's premium to U.S. crude fell to its lowest in more than eight months as higher shale oil supply reduced the U.S. need for imports.

U.S. single-family home prices rose in January, the biggest annual increase in six-and-a-half years, helping bolster the demand outlook in the world's largest oil consumer.

"Solid housing data showing rising home prices pointed to a U.S. economy that continues to rebound, helping boost U.S. crude," said John Kilduff, partner at Again Capital LLC in New York.

The premium over U.S. light crude of Brent, the predominant global oil price benchmark based on North Sea crudes CL-LCO1=R, was at $12.77 at 1336 GMT, down from as high as $23.45 in February.

The premium has dropped around 34 percent so far in March, its biggest such fall since November 2011.

Brent crude futures rose 22 cents to $108.17 a barrel, in the middle of the $107 to $109 range of the past two weeks.

U.S. crude gained 81 cents to $95.62, having hit its highest level since Feb. 19.

The U.S. housing figures highlighted the contrasting fortunes of economies on either side of the Atlantic, with investors fretting that debt problems afflicting euro zone countries are far from over after Cyprus banks were bailed out.

"The economic position in the U.S. looks better than in Europe," said Olivier Jakob, analyst at Petromatrix in Zug, Switzerland.

Supply issues were at the heart of the strength of U.S. crude relative to Brent.

SHALE EXPANSION

"The erosion (of the premium) is because U.S. shale production is decreasing imports of light sweet crude grades," said Seth Kleinman, head of energy research at Citigroup.

Kleinman said the spread could reach as low as $10 per barrel but was unlikely to shrink much further because of difficulties in getting U.S. oil supplies to the East Coast and the Gulf of Mexico.

Problems in the euro zone continued to brake gains.

The president of Cyprus assured citizens their best interests had been served by an 11th-hour deal with the European Union, the European Central Bank and the International Monetary Fund to shut the country's second-largest bank in return for 10 billion euros ($13 billion) in rescue funds.

Cyprus banks will be closed until Thursday and will then be subject to capital controls to prevent a run on deposits.

Brent pushed in mid-February above $119 a barrel to its highest level this year before dropping back due to economic concerns and improving North Sea supply.

U.S. commercial crude oil stockpiles are forecast to have increased by 1.1 million barrels last week on an expected rise in imports, ahead of weekly industry data later in the day, a preliminary Reuters survey of analysts showed on Monday. (Additional reporting by Robert Gibbons in New York; Editing by Anthony Barker and Alison Birrane)

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