* Futures cut early gains
* Lack of Iran-West nuclear talks progress supportive
* Norway wage deal averts oil worker strike
* Coming up: API oil data 4:30 p.m. EDT Tuesday (Adds quote, background)
By Anna Louie Sussman
NEW YORK, April 8 Oil prices edged higher on Monday, lifted by gains in gasoline futures and strong selling of the spread between Brent crude and U.S. crude.
Brent's premium to U.S. West Texas Intermediate futures CL-LCO1=R settled at $11.30 a barrel, after narrowing to just over $11 in afternoon trade, the lowest level since June.
The move extended a trend that has knocked $12 off the key spread since February because of the start-up of new pipeline capacity that will alleviate a glut of crude at the Cushing, Oklahoma, hub for the U.S. contract. In addition, supply concerns around Brent-related crude have eased, weakening the futures contract relative to U.S. oil.
"Improved output of North Sea production and the expected increases later in the year, and the displacement of West African Barrels that were previously bound for the U.S. which are now competing with North Sea barrels for Asian market share," are all contributing to an increase in Brent supply, said John Kilduff, a partner at Again Capital LLC, referring to the decline in U.S. dependence upon North Sea and West African crude which is redirecting those barrels to Asia.
Analysts said the sharp sell off in the spread seen over the past two sessions, from over $13 a barrel last Thursday, could be short-lived, however, and that it may be poised for a rebound.
"(The spread) probably starts to widen out at this point. Just off the technicals, the spread is overdone," said Bill Baruch, senior market strategist at iitrader.com in Chicago.
Outright prices were choppy, with Brent May crude settling up 54 cents at $104.66 a barrel, after reaching a session high of $105.55. Brent hit an eight-month low of $103.62 per barrel on Friday after disappointing U.S. jobs data, and traders said the downtrend could resume again once the market had consolidated.
U.S. May crude settled up 66 cents at $93.36, peaking at $93.75 early Monday following the 4.6 percent week-on-week slide registered on Friday.
U.S. RBOB futures led the oil complex higher, settling up nearly 4.57 cents at $2.9093, with traders citing the approaching U.S. summer gasoline season as a possible support.
Fears remain about the potential for global supply disruption because of the dispute over Iran's nuclear program, after weekend talks with western powers ended without a resolution.
U.S. Secretary of State John Kerry said on Sunday world powers would pursue further talks with Iran, but stressed that the process could not go on forever.
Another potential supply disruption, however, was averted by last-minute wage agreement deal in Norway, avoiding a threatened strike that could have disrupted the country's oil and gas industry.
"Crude oil got a bounce after last week's drop, and from the lack of a deal or any progress with Iran in the talks about its nuclear program, but the dollar's strength may limit the rise," said Phil Flynn, analyst at Price Futures Group in Chicago.
Early support for crude oil prices also came from "nervousness about Korea," Flynn noted, where tensions on the peninsula have ratcheted up in recent days after provocative words from North Korean leader Kim Jong Un.
(Additional reporting by Robert Gibbons in New York, Christopher Johnson in London and Ramya Venugopal in Chennai, India; Editing by Alden Bentley)