RTRS:Oil firmer at $108, Mideast violence stokes supply fears
* Rockets hit near Tel Aviv as Gaza death toll rises
* Coming Up - Oct U.S. industrial production: 1415 GMT (Updates previous Singapore)
Nov 16 (Reuters) - Oil firmed over $108 a barrel on Friday, as uncertainties surrounding the global economic outlook weighed on prices, and a showdown between Israel and the Palestinians stoked worries about supply.
Investors were concerned that Arab producers may be drawn into any possible Israeli-Palestinian conflict, which could impact their supply lines.
Brent has held above $100 for most of this year on fears of disruption from the Middle East with a weak demand outlook capping further gains.
Brent crude gained 18 cents to $108.19 a barrel by 0918 GMT. U.S. oil slipped 8 cents to $85.37.
"The global economy has got issues and geopolitical tensions, particularly in the Middle East, are rising," said Jonathan Barratt, chief executive of Barratt's Bulletin, a Sydney-based commodity research firm.
"That means a status quo for the oil market for some time."
TRADING SPREADS
The unrest in the Middle East has resulted in Brent futures rising more than the U.S. benchmark, which is weighed down by U.S.-centric factors such as higher inventories, weak demand growth outlook and a potential financial crisis.
That widened the price difference between the two crudes to $26 a barrel in the previous session, the most since October 2011, and the spread CL-LCO1=R may stay wide for sometime. It was at around $23 during London trading on Friday.
"While an easing of Middle East concerns will invariably lead to a narrower spread, we feel that the extent of this narrowing is more limited than a month ago," analysts at Standard Bank said in a report.
"The main impetus for a sustained narrowing will have to come from support in the WTI market - support which does not look as promising anymore."
U.S. crude inventories rose last week while gasoline and distillate stockpiles fell along the East Coast where the fuel distribution system was still recovering from Hurricane Sandy, the U.S. Energy Administration said.
Crude stockpiles in the world's largest consumer rose nearly 1.1 million barrels, below estimates for a build of 1.9 million barrels. Overall distillate stockpiles fell by 2.54 million barrels versus a 1.3 million barrel drawdown forecast. (Additional reporting by Manash Goswami in Singapore; editing by William Hardy)
