* For the month, Brent rises 6.7 pct, WTI up 5.2 pct
* Brent/WTI arbitrage widens, encouraging exports
* Iraq raises southern exports to 3.45 mln bpd
* OPEC-led supply cuts expected to extend beyond March 2018
* U.S. crude stocks fall 5.1 mln bbls, gasoline down 7.7 mln-API (Adds API data, after-market reaction)
NEW YORK, Oct 31 (Reuters) - Oil prices settled higher again on Tuesday, notching a monthly gain of more than 5 percent, but analysts said bullish sentiment that has driven Brent crude to its highest in more than two years could encourage U.S. producers to export more oil.
Brent settled up 47 cents or 0.7 percent to $61.37, close to its July 2015 highs reached earlier this week, and up around 37 percent from its 2017 lows hit in June.
U.S. West Texas Intermediate crude (WTI) settled up 23 cents or 0.4 percent to $54.38, still near its highest since February and close to its highest in more than two years.
Traders and brokers said investors were adjusting positions after price rises of around 5 percent in October.
For the month, Brent was up 6.7 percent, while WTI rose 5.2 percent. WTI's discount to Brent <CL-LCO1=R> has widened to nearly $7, making it attractive to exporters.
"The large differential has opened the door on regional arbitrage, driving a spike in U.S. crude exports over recent weeks," BMI Research said in a note.
U.S. crude exports have jumped to close to 2 million barrels per day (bpd) and production <C-OUT-T-EIA> has risen almost 13 percent since mid-2016 to 9.5 million bpd.
"The problem is as soon as prices move up it's too easy for U.S. producers to add another rig or another completion crew," said Stewart Glickman, energy equity analyst at CFRA Research in New York, "Then they increase production and youre back where you started."
U.S. crude and gasoline futures extended gains in post-settlement trade after industry group the American Petroleum Institute said that U.S. oil inventories fell far more than expected.
Crude inventories fell 5.1 million barrels in the week to Oct. 27 to 456.8 million, compared with analysts' expectations for a decrease of 1.8 million barrels. Gasoline stocks plunged 7.7 million barrels, versus forecasts of a 1.5 million-barrel draw, the API said.
U.S. government oil inventory data will be released at 10:30 a.m. (1430 GMT) on Wednesday.
Bullish sentiment has been fueled by a pledge by the Organization of the Petroleum Exporting Countries, Russia and other exporters to hold back about 1.8 million bpd in oil production to tighten markets.
OPEC's adherence to its pledged supply curbs rose to 92 percent from September's 86 percent, a Reuters survey showed, as top exporter Saudi Arabia continued to pump below its OPEC target and output in Venezuela, in economic depression, declined further.
OPEC is scheduled to next meet at its headquarters in Vienna on Nov. 30. (Additional reporting by Christopher Johnson in London, Henning Gloystein in Singapore; Editing by Marguerita Choy and Chris Reese)