By Anna Louie Sussman and Jeanine Prezioso
NEW YORK (Reuters) - U.S. crude oil futures rose more than 1 percent on Thursday spurred by refiners needing oil to meet robust distillate exports and as traders bought contracts to cover short positions.
The sharp move in crude oil futures came on thin volume after the market rose to a key technical level, triggering stop losses and forcing traders to scurry and buy back contracts ahead of rising prices, brokers said.
Traders also cited strong cash crude prices in the U.S. Gulf Coast, where Light Louisiana Sweet crude differentials hit a seven-month high of $10 over U.S. crude, or West Texas Intermediate (WTI).
Gulf Coast refiners have been running high volumes of crude to make distillates for a booming export market. Wednesday's U.S. oil inventory report, showed draws in crude oil stocks for a third week in a row and a large and unexpected fall in distillates stocks.
"That confirms the inventory reports we're seeing. We know refiners are running at high levels, the demand outlook is just strong down in the Gulf and people are probably keying off that," said John Kilduff, a partner at Again Capital LLC in New York.
U.S. crude for January delivery, which expires at the end of the session on Thursday, broke through the 200-day moving average of $98.78 for the first time in a week, sailing past $98.75, a level at which many traders held positions.
The contract then extended gains by more than $1 as traders covered short positions, trading as high as $99.17, before easing to $99.01 by 1:45 p.m. EST (1845 GMT). U.S. crude for February delivery last traded $1.17 higher at $99.23.
"There are a bunch of people that need to get out of this contract ahead of the end of the day, so that injects a certain degree of volatility," said Bob Yawger, director of commodities futures at Mizuho Securities in New York.
Brent crude was last trading 56 cents up to $110.19.
U.S. crude oil's rise narrowed its discount to Brent. The spread between the two benchmarks widened to a high of $12.16 earlier in the session, before traders pushed it in by nearly $1 to a low of $10.73.
Buoyant crude prices pushed up U.S. gasoline futures which were up 1.63 percent to $2.7412 per gallon, breaching the 100-day moving average for the first time in more than three months.
Data showing a rise in U.S. initial weekly jobless claims to the highest level in nearly nine months briefly moved the oil market lower in early trade before it resumed its gains.
Traders and investors also remained focused on supply fundamentals, including Libyan production outages and unrest in South Sudan.
Libyan exports have fallen to 110,000 barrels per day (bpd) from more than 1 million bpd in July, and the country has had to step up fuel imports.
In South Sudan, about 200 oil workers have sought refuge at a United Nations base and are expected to be evacuated after five days of conflict. A senior official said at least 16 people had been killed in clashes since late Wednesday.
(Additional reporting by Claire Milhench in London, Manash Goswami in Singapore; Editing by William Hardy, Keiron Henderson and Bob Burgdorfer)
