UPDATE 6-Brent crude up, spread trading widens premium to US oil
* U.S. crude oil stock build threat spurs early spread trading
Suicide attack on U.S. embassy in Turkey stokes concerns
* U.S. employment growth posts modest improvement
* China official PMI up but slightly lower than expected
(Updates prices, market activity; previous LONDON)
By Gabriel Debenedetti
NEW YORK, Feb 1 (Reuters) - Brent crude rose to a four-month peak on Friday, boosted by optimism about the global economic recovery and heavy trading of the spread with U.S. oil futures.
Brent's premium to West Texas Intermediate rose more than $1 a barrel in early activity on expectations that inventories at the Cushing, Oklahoma delivery point for the U.S. oil futures would continue to build.
The spread had narrowed earlier this month with the start up of the expanded Cushing to Texas Seaway pipeline, which had been expected to to draw down Midwest inventories bulging from rising North American production.
But traders said the realization that the pipeline may not be able to run at full capacity of 400,000 barrels per day until the second half of the year again raised the spectre that stocks at Cushing would build and weigh on U.S. oil futures.
"The realization that the Seaway pipeline reversal is an answer to almost none of the crude oil backlog issues in the Midcontinent is weighing on WTI prices outright and especially in relation to Brent crude oil prices," said John Kilduff, partner at Again Capital LLC in New York.
"It's as if they built a pipeline to nowhere. There was a bout of irrational pipeline exuberance."
The spread move may have been exacerbated on Friday by a hedge fund adjusting a major position to take this into account, according to some market players.
Brent headed for a third consecutive week of gains and was on track to post its biggest weekly gain in two months. U.S. crude was set to rise for an eighth straight week, matching a similar winning streak in July-August 2004.
Brent futures for March rose to a high of $117.07 a barrel, its highest since September. At 11:51 a.m. EST (1651 GMT), front-month Brent traded up $1.28 to $116.83 a barrel.
U.S. crude gained 51 cents to trade at $98.00, erasing earlier losses.
The discount of the front-month U.S. contract to Brent crude futures widened out to over $19 a barrel, the highest level since before the Seaway line reopened with expanded throughput capacity earlier this month.
Positive U.S. employment numbers also gave both contracts a boost in early U.S. trading, helping ease worries about the world's top economy after data released earlier in the week showed the economy unexpectedly contracted in Q4.
U.S. employers added 157,000 jobs to their payrolls last month, the Labor Department said. The U.S. unemployment rate edged up 0.1 percentage point to 7.9 percent and revisions showed employment gains in the prior two months were bigger than initially reported.
Meanwhile, a pair of surveys on China's factory output offered diverging views on the pace of the recovery of the world's second largest oil consumer.
The official purchasing managers' index (PMI) missed market expectations, underscoring that the economy is making only a mild recovery from its weakest year since 1999. But a private PMI survey released by HSBC showed growth among manufacturers quickening to a two-year high.
Worries about Brent supply due to conflict in the Middle East also pushed its price up. A suicide bomber killed a Turkish security guard at the U.S. embassy in Ankara on Friday.
The attack further increased tensions in the region after Israel bombed targets in Syria earlier in the week.
(Additional reporting by Robert Gibbons in New York, Ron Bousso in London and Jessica Jaganathan in Singapore; Editing by Christopher Johnson and Leslie Gevirtz)