UPDATE 3-Oil rises above $108 on hopes for US fiscal cliff deal

* "Fiscal cliff" hopes lift Asian shares, other riskier assets

Obama proposes higher taxes for incomes over $400,000

* Seaway pipeline expansion news supports U.S. oil

(Updates previous SINGAPORE, adds quote)

By Shadia Nasralla

LONDON, Dec 18 (Reuters) - Brent crude oil rose above $108 a barrel on Tuesday on signs of progress in U.S. talks to resolve a budget crisis that threatens to tip the world's top oil consumer into recession.

U.S. President Barack Obama made an offer to Republicans that included a major shift in position on tax hikes for the wealthy, leaving lower tax rates in place for everyone earning less than $400,000, a source familiar with the talks said.

Oil and other riskier assets were boosted when the U.S. president moved away from the $250,000 threshold Democrats have been demanding for months, closer but still far from Republican House of Representatives Speaker John Boehner's preference of $1 million.

Brent crude rose 68 cents to $108.32 a barrel by 1013 GMT. U.S. oil rose above the 50-day moving average -- a key technical indicator watched by traders -- for the first time since early December, gaining 54 cents to $87.74 a barrel.

"Today there is optimism that we'll see the resolution to the U.S. fiscal cliff which drives up markets in general," said Bjarne Schieldrop, chief commodity analyst at SEB in Oslo.

"Even if we haven't seen a solution yet, the optimism is there."

Brent crude has traded between a high of $112 and a low of $104 since November, pressured by concerns the U.S. will not reach a deal on the "fiscal cliff" before the end of the year, triggering automatic tax hikes and spending cuts.

The possible end to the stalemate comes as data points to a revival in demand in China, renewing investor optimism over demand growth in the world's second largest oil consumer.

The oil minister of Saudi Arabia said the market is well balanced with prices above $100 a barrel, a level the world's largest exporter has tried to achieve by adjusting production levels over the past two years.

"Supply is plentiful, demand is good," Ali Al-Naimi told Reuters in an interview in Seoul.

"Nobody is complaining about high prices or low prices. They are no longer sky rocketing or falling down."

Average Brent crude prices have been relatively stable over the last two years, though they have at times spiked towards $120 and above as supplies from the Middle East have been disrupted by the Arab Spring and as Western sanctions have cut Iranian oil exports.

Brent is on course to average just under $111.70 a barrel in 2012 after an average of $110.91 in 2011.

SPREAD NARROWS, SEAWAY EYED

The price difference between Brent and U.S. crude oil <CL-LCO1=R> narrowed by more than $2 on Monday and stayed around $20 per barrel Tuesday on news that an expanded pipeline between Cushing, Oklahoma, and Houston, Texas, will start transporting crude next month.

Enterprise Products Partners LP and partner Enbridge Inc said the 150,000 barrel per day (bpd) Seaway Pipeline will pump 400,000 bpd by early January and will be expanded to 850,000 bpd of crude in 2014.

A glut of crude in Cushing, delivery point of the U.S. crude oil future contract, has contributed to its heavy discount to Brent, which widened to more than $25 per barrel last month.

The increased pipeline capacity will allow more crude to flow from Cushing to the Gulf Coast, where it fetches prices closer to Brent.

Meanwhile, a drawdown of inventories by U.S. refineries for year-end tax purposes may result in a lower reading for stockpiles data due on Tuesday, a Reuters poll showed.

Crude stocks may have dropped by 1 million barrels in the week ended Dec. 14, the poll showed.

(Additional reporting by David Sheppard in London and Manash Goswami and Ramya Venugopal in Singapore; editing by Keiron Henderson)