New York, April 25 (Reuters): Leading independent US refiner Valero Energy Corp has agreed to buy rival Premcor Inc for $6.9 billion in cash and stock, creating the largest refiner of crude oil in North America and raising expectations of other sector deals.

Analysts said the deal expands San Antonia, Texas-based Valero?s geographic reach in the United States and boosts its processing of heavy, high-sulphur sour crude oil, which costs less to buy than the lighter oil.

?With industry margins at an all-time high, this is the best and most strategic acquisition, which will be a cash-making machine for the foreseeable future,? said Fadel Gheit, a senior analyst at Oppenheimer & Co.

?It will also put pressure on others to act and add to the value of the remaining independent refiners like Frontier or Tesoro,? Gheit added.

The cash and stock deal will add four refineries to Valero?s 15 operations and boost its refining capacity to 3.3 million barrels of oil a day from 2.5 million, generating $70 billion annual revenue.

The deal comes at a time when domestic supply in the United States has not kept pace with demand, according to the National Petroleum Refiners Association, because it is difficult to build new facilities for economic, environmental and political reasons.

There are now 149 refineries with a combined capacity of 16.8 million barrels a day, down from 325 with a capacity of 18.6 million barrels a day in 1981, according to the group.

The cash portion of the acquisition deal is valued at $72.76 a share, which represents a premium of about 23 per cent to Premcor's closing price of $59.00 a share on Friday on the New York Stock Exchange.

Shares of Premcor, based in Old Greenwich, Connecticut, rose to $71.30 in pre-market trade on the Inet brokerage.

Shares of Valero fell to $74.90 on Inet, down from a close of $75.04 on Friday on the NYSE.