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. U.S. oil settled 97 cents higher to end at $98.77, its highest settlement in nearly 2 months.
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. 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.
"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.
Brent crude added 60 cents to trade above $110 a barrel, after ending $1.19 higher on Wednesday.
For more information on commodities prices, please click here.