The U.S. trade gap widened less than expected in March as exports fell 2.4 percent and imports dropped for the eighth consecutive month, a U.S. government report showed on Tuesday.

The trade gap grew to $27.6 billion, from an upwardly revised estimate of $26.1 billion in February, which was the lowest since November 1999.

March was the first time the trade gap had expanded in seven months, but analysts had expected it to widen even more to $29 billion.

In a sign U.S. demand remained weak in the first quarter, U.S. imports of goods and services fell 1 percent in March to $151.2 billion, the lowest since September 2004.

Imports of goods were the lowest since April 2004, and sub-categories such as non-petroleum products, industrial supplies and materials and capital goods were the lowest since February, May and July of 2004, respectively.

Low oil prices also continued to hold the value of imports in check, even though average prices jumped more than $2 per barrel in March to $41.36 per barrel.

The monthly average was still less than half of the March 2008 level of $89.85 a barrel, holding the petroleum import bill to a little more than $16 billion compared to $33.1 billion in the same month last year.

U.S. exports tumbled in March to $123.6 billion, after rising for one month in February. The March downturn resumed a trend dating back to July.

Overall goods exports were the lowest since February 2006 while exports of capital goods were the lowest since October 2005.

U.S. exports to China grew 19.1 percent in March to $5.6 billion, the highest in five months. However, U.S. imports from China also increased and the politically sensitive trade gap with that country grew to $15.6 billion in March.

(Reporting by Doug Palmer, Editing by Neil Stempleman)