UPDATE 4-Brent rises to $109 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
(Adds details, updates prices)
LONDON, July 19 (Reuters) - Brent crude oil rose to $109 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.
That bullish combination has helped push U.S. crude, commonly called West Texas Intermediate or WTI, to a 16-month high, narrowing its discount to Brent to 80 cents from more than $23 in February.
The convergence between the two crude benchmarks - the Brent-WTI spread <CL-LCO1=R> shrank to 51 cents on Thursday - has occurred as increased pipeline capacity reduces the glut of oil at the WTI delivery point of Cushing, Oklahoma. Stocks there have fallen to 46 million barrels from 52 million in January.
Brent rose 35 cents to $109.05 by 1120 GMT. U.S. oil rose 55 cents to $108.59.
"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)