UPDATE 7-U.S. oil surges, gains on Brent as crude inventory shrinks
* U.S. crude oil stocks fall 9.9 mln barrels last week -EIA
* Brent's premium to U.S. crude shrinks to $2.40 a bbl
* China crude imports down 1.4 percent over first six months
NEW YORK, July 10 (Reuters) - U.S. crude oil prices surged as Brent crude rose modestly, narrowing the spread between the two benchmarks to its lowest point in 2-1/2 years, on a sharp decline in fuel stockpiles in top oil consumer the United States.
U.S. crude oil inventories plunged about 10 million barrels for a second week, their deepest two-week draw on record, Energy Information Administration (EIA) data showed. Inventories at the Cushing, Oklahoma hub dropped to the lowest this year,
The restart of a new crude distillation unit at BP's 400,000-barrel per day Whiting refinery and increased transport capacity out of Cushing helped drain swollen supplies from the Midwestern hub.
"Given the high utilization rate and what's happening in Cushing with the effect of the rail transport and the pipelines, WTI is reacting strongly," said John Kilduff, a partner at Again Capital LLC.
Brent's gains were limited by concerns about sluggish growth in China, which reported lower-than-expected imports and exports and a 1.4 percent drop in crude imports for the first half of the year.
U.S. crude held gains of more than $2 for extended periods during the session, while Brent crude never rose more than $1.
U.S. crude rose $2.22 to $105.75 a barrel by 12:05 p.m. EDT (1605 GMT). Brent gained 50 cents to $108.31.
After release of the EIA data, Brent's premium to U.S. crude narrowed to $2.40 a barrel for the first time since December 2010.
"While oil demand in the U.S. appears to be reviving, current figures from China point to slowing demand dynamism there," a Commerzbank research note said.
Despite disappointing data from China, OPEC expects a stronger economy to boost world oil demand by 1 million barrels a day in 2014, the highest growth since 2010.
In its monthly report, the Organization of the Petroleum Exporting Countries said its share of the world market will decline next year due to rising U.S. shale oil supplies.
Political risks were also supporting prices, and investors continued to keep watch on Egypt.
Egypt's new interim prime minister reached out to liberals on Wednesday to revive a shattered economy as he began forming a government to heal a nation divided by bloodshed a week after the elected president was overthrown.