Crude oil futures up headed to first monthly rise since June

NEW YORK (Reuters) - Crude oil rose on Friday with Brent and U.S. futures on pace to post their first monthly gains since June, supported by an improving demand outlook and supply outages.

Front-month March New York ultra-low sulfur diesel (ULSD) futures surged more than 7 percent intraday as March ULSD and RBOB rallied ahead of Friday contract expirations.

Brent April crude was up $1.51 at $61.56 a barrel at 11:54 a.m. EST, on pace to post a 16 percent monthly gain, the first monthly rise since June.

U.S. April crude was up 75 cents at $48.92 a barrel, needing a finish above $48.24 to post a February gain.

The U.S. crude contract's gains have been hemmed in by rising crude oil inventories in the United States, up 8.4 million barrels last week, according to government data.

Oil has been supported by signs that lower prices are starting to reduce investment in production in non-OPEC countries and the market awaited the latest U.S. rig-count number from oil services company Baker Hughes on Friday.

Brent's more pronounced gains this month have been fueled by disruptions to production and exports from Libya and Iraq in recent weeks, contributing to tightness in the physical market in the Mediterranean.

Also supportive to Brent, Statoil has shut its Statfjord C platform in the North Sea after discovering cracks in the flare tower.

"The main event this week has been the widening of the spread between Brent and WTI (U.S. crude)," Ole Hansen, senior commodity strategist at Saxo Bank, said.

The spread between Brent and U.S. crude widened to $12.80 a barrel on Friday, the highest Brent premium since January 2014.

Brent also received support from strong U.S. refined products futures approaching expiration for March contracts.

"Cold weather and refinery problems and tight supplies on the East Coast have helped make the ULSD contract the most sensitive part of the oil sector," said Robert Yawger, director for energy futures at Mizuho Securities USA in New York.

March ULSD was up 10.87 cents at $2.2445 a gallon, after reaching $2.3144, a 2015 high and the highest since November.

March ULSD's premium to the April contract was as much as 35.90 cents intraday.

March RBOB gasoline was up 5.44 cents at $1.7620 a gallon, leaving it at a 19 cent deficit to April.

Both products headed for monthly gains.

(Additional reporting by Claire Milhench in London and Jane Xie in Singapore; Editing by Dale Hudson and Marguerita Choy)

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