* Brent/WTI spread below $10 a barrel for first time since early 2012
* Comments on Syria's possible chemical weapons pushes Brent, U.S. crude higher
* Pipeline shipments out of U.S. hub said to increase
* Rise accompanies broader rally in commodities (Updates to settlement, adds quotes, technical analysis)
By Anna Louie Sussman and Matthew Robinson
NEW YORK, April 25 Oil prices rose as much as $2 on Thursday as new reports over Syria's possible use of chemical weapons stirred concerns over stability in the Gulf region, while a wider rally in commodity and equity markets fuelled buying.
The narrowing spread CL-LCO1=R between the front-month Brent crude oil futures contract and the U.S. crude oil futures contract (WTI) was once again in focus, closing at less than $10 a barrel for the first time since early 2012 after an industry group reported a large drop in Cushing, Oklahoma, crude stocks.
U.S. Defense Secretary Chuck Hagel's midmorning comments on Syria's possible use of chemical weapons sent jitters through the market, traders noted.
U.S. crude rose more than 2 percent to close up $2.21 at $93.64 a barrel. Brent crude settled up $1.68 at $103.41 a barrel, narrowing the spread by more than 50 cents to $9.77 a barrel.
Technically-driven trading helped propel gains, with little to stop the upward move after U.S. prices broke above the 50-, 100- and 200-day moving averages, said Bill Baruch, senior market strategist at iitrader.com in Chicago, Illinois.
"The rally here is because the longs had reached the saturation point when U.S. crude got to about $95. They sold off to about $85, which is very long-term support," said Michael Korn, president of Skokie Energy in Princeton, New Jersey.
Gold, copper and grain markets also rose strongly on the day as investors made a cautious return to raw material markets that have tumbled sharply this month, while U.S. stocks also gained on reports that the number of Americans filing new claims for unemployment benefits fell last week.
Brent has risen in five of the last six trading sessions but is still down more than 6 percent from the beginning of April. U.S. crude has risen for seven out of the last eight trading sessions. Although it is still down more than 4 percent since the beginning of April, it has climbed back steadily from a mid-month low of $85.61.
SPREAD NARROWS, FORTIES FLOWS
Some traders said the narrowing Brent/WTI spread had been driven by a report from industry group Genscape showing that Cushing crude oil stocks had dropped by 1.6 million barrels between April 16 and April 23, as shipments on the Seaway pipeline to the Gulf Coast increased.
The tighter spread could stymie some of the higher-cost barge shipments from the U.S. Midwest to refiners on the Gulf, Citi Futures Perspective analyst Tim Evans wrote.
U.S. crude had been trading at a wide discount to Brent because of large inventory builds at key pricing point Cushing, Oklahoma. But pipelines are now taking more crude to the U.S. Gulf Coast, alleviating the supply pressure at Cushing.
Brent crude gained despite news that at least nine May cargoes have moved up the North Sea Forties crude programme after stronger-than-expected output from Britain's Buzzard oilfield, the biggest contributor to the Forties stream. (Additional reporting by Robert Gibbons in New York, Claire Milhench in London, Jessica Jaganathan in Singapore; Editing by Chris Reese)
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