UPDATE 5-Brent above $108 as U.S. oil slips back from parity
* Hedge fund bets on U.S. oil prices hit record high
* WTI loses ground ahead of August contract expiry
* WTI's strong September/October backwardation draws investors
* G20 puts growth before austerity, vows to tread carefully
(Recasts, updates prices)
LONDON, July 22 (Reuters) - Brent held above $108 a barrel on Monday while U.S. oil futures declined ahead of a contract expiry, widening the spread between the two benchmarks after reaching parity in the previous session for the first time since 2010.
Brent rose 31 cents to $108.38 a barrel by 1407 GMT. U.S. benchmark West Texas Intermediate (WTI) crude fell 15 cents to $107.90 after hitting a 16-month high of $109.32 on Friday.
WTI earlier on Monday extended its premium over Brent but reversed gains following the opening of trade in the United States as investors rolled into next month's contract ahead of the August contract expiry later in the day, traders said.
"The market leadership is back with WTI. We're seeing that in volumes traded and open interest that is increasing in WTI," said Olivier Jakob, analyst at Petromatrix.
Hedge funds amassed record bets on rising U.S. crude oil prices in the week to July 16, trade data by the U.S. Commodity Futures Trading Commission (CFTC) showed.
The convergence of the two front-month benchmarks comes as increased pipeline capacity has drained the glut of oil at the WTI delivery point of Cushing, Oklahoma, to the U.S. Gulf Coast, where refinery demand has been high. Stocks at Cushing have fallen to 46 million barrels from 52 million in January.
The strong backwardation between the September and October WTI contracts, when the front month price is higher than the next one, has been the main driver in the contract's recent rally, according to Jakob.
The WTI September/October spread was at around $1.80, with the August contract expiring later on Monday. Prior to Friday, it had last traded above Brent in October 2010.
"The extraordinarily strong backwardation is strengthening and bringing everyone into the WTI," Jakob said.
The easing of the Cushing glut has nevertheless not led to lower prices at the U.S. Gulf Coast as refineries there are eager to cash in on robust margins and exports.
At the same time, the global benchmark Brent could find support from a stronger demand growth outlook and supply risks in the Middle East and Sudan, according to Carsten Fritsch, analyst at Commerzbank.
A pledge by the Group of 20 nations, which account for 90 percent of the world economy, to put growth before austerity has fuelled hopes of a recovery in the consumption of commodities.
Speculators increased net long positions in Brent crude oil futures in the week to July 16, data from the IntercontinentalExchange (ICE) showed on Monday.
(Additional reporting by Manash Goswami; Editing by Richard Pullin, Jeff Coelho and David Evans)