UPDATE 3-Brent steady above $108 on demand growth prospects
* Brent premium to U.S. crude below $1
* U.S. jobs, factory data offer bright signs for economy
* Bernanke says Fed flexible on bond buying
(Updates throughout, previous SINGAPORE)
LONDON, July 19 (Reuters) - Brent crude oil held above $108 a barrel on Friday after encouraging economic data and a sharp decline in U.S. crude stockpiles signalled stronger demand for fuel in the world's top oil consumer.
The bullish combination has pushed up U.S. crude - or WTI - narrowing its discount to benchmark Brent to 80 cents. The spread shrank to 51 cents on Thursday, the narrowest since 2010.
Brent rose 1 cent to $108.71 a barrel by 1002 GMT, after climbing earlier to a session high of $108.93. U.S. oil rose 15 cents to $108.19 and is set to rise for a fourth week.
"Better-than-expected U.S. economic data are providing the WTI price with upward momentum and so is the sharp reduction of U.S. crude oil stocks in past weeks," said Commerzbank.
But analysts say oil's rally, nearly 10 percent for Brent and 17 percent for U.S. crude in less than four weeks, may be overdone given ample global supplies.
"We do not believe this situation will last, given the fact that U.S. oil production is still rising and stocks are still high in the U.S.," Commerzbank said in a note.
New claims for U.S. jobless benefits fell in the world's biggest economy and key factory data improved, which lent support to the price of oil. A third straight week of sharp declines in U.S. crude stocks kept losses in check.
Oil prices, and that of other riskier assets, have also been boosted by Federal Reserve Chairman Ben Bernanke's testimony before Congress in which he reiterated that the Fed would only start phasing out its stimulus once it is sure the economy is strong enough to stand on its own.
This helped soothe markets, which saw a brief but fierce global market sell-off last month when Bernanke outlined the Fed's plans to curtail its so-called quantitative easing.
Optimism about a revival in oil demand growth also came from news that China had urged local governments to speed up spending this year's budget to support economic growth.
A recent series of weak data from the world's second-biggest economy had raised concerns global oil demand growth will fail to meet already pared-down expectations.
(Additional reporting by Manash Goswami in Singapore; editing by James Jukwey)