* Dollar at seven-week low against other currencies
* Moody's cuts 2016 Brent price estimate to $43/bl
* Brent/WTI spread nearly halves in one week (Updates throughout, changes dateline, previous SINGAPORE)
By Karolin Schaps
LONDON, Dec 15 (Reuters) - Oil prices edged tentatively higher on Tuesday as a slump to near 11-year lows in the previous session triggered investors' buying appetite, but the crude glut kept gains capped.
Brent crude LCOc1 , the global benchmark, traded up 40 cents, or 1 percent, at $38.32 a barrel at 0913 GMT, levels last seen in late 2008. U.S. crude CLc1 was trading at $36.49, up 18 cents.
"It's technical buying. It's pretty obvious shorts started to take profit when Brent prices dropped down to the 2008 low," said Tamas Varga, oil analyst at London-based PVM Associates.
The dollar slipped to a seven-week low against a basket of currencies, incentivising the purchase of dollar-denominated oil contracts.
Nevertheless, bearish sentiment remained strong, fuelled by an OPEC decision earlier in December to abandon setting a production ceiling for the oil cartel and a likely rise in Iranian oil exports after sanctions are lifted.
Credit ratings agency Moody's said on Tuesday it had lowered its 2016 Brent crude oil estimate to $43 a barrel from $53 on a the outlook for a prolonged oversupply. urn:newsml:reuters.com:*:nWNAB09FKL
With OPEC pumping strongly and U.S. drillers keep producing large amounts of crude, the Brent/WTI premium has nearly halved over the last week to $1.8 per barrel.
Oil markets usually see strong demand towards year end as the northern hemisphere enters its peak winter heating demand season. Yet an unusually mild start to winter, in part due to the El Nino weather phenomenon, has limited heating demand. urn:newsml:reuters.com:*:nL3N0Z51NL
Also looming large is an expected increase in U.S. interest rates this week. Crude typically falls as the U.S. currency strengthens since it becomes more expensive for buyers paying in other currencies.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ CHART-Europe to remain unusually warm for rest of year:
http://tmsnrt.rs/1TM4swr CHART-Brent/WTI premium tumbles:
http://tmsnrt.rs/1YbUxH5
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