* EU threatens new Russian sanctions
* U.S. crude stocks down 4 mln barrels, Cushing down 1.4 -EIA
* U.S. gasoline and distillate stocks rise -EIA (Updates prices to settlement)
By Anna Louie Sussman
NEW YORK, July 23 (Reuters) - Crude oil futures rose on Wednesday, as oil stockpiles in the United States fell more than expected and geopolitical tensions in Eastern Europe and the Middle East persisted.
U.S. crude’s gains outpaced Brent’s for most of the session, after a government report showing that U.S. crude stocks fell by 4 million barrels last week, but Brent caught up as traders covered short positions ahead of the close.
“As the day closes, people are quick to cover up positions or take long positions. No one knows what’s going to happen in those next 12 hours and it’s better to be safe than sorry,” said Carl Larry, chief executive of consultancy Oil Outlooks in Houston.
The U.S. Energy Information Administration also reported crude oil inventories at Cushing, Oklahoma, the delivery point of the U.S. crude contract, fell by 1.45 million barrels.
A build of 5 million barrels in the combined inventories of gasoline and distillates and a 1 percent decline in gasoline demand curbed price gains.
The Ukraine government said two of its fighter jets were shot down over rebel-held territory in eastern Ukraine on Wednesday and that the missiles that brought them down might have been fired from Russia.
A powerful Ukrainian rebel leader has confirmed that pro-Russian separatists had anti-aircraft missiles of the type the U.S. government says were used to shoot down Malaysia Airlines flight MH-17.
Brent crude for September delivery rose 70 cents to settle at $108.03 and continued to climb in post-settlement trade to stand at $108.19 at 3:48 p.m. EDT (1948 GMT).
U.S. crude for September delivery rose 73 cents to $103.12 a barrel.
U.S. crude’s discount to Brent dropped to $4.51 earlier in the session, near a three-month low, as high domestic refinery utilization rates signaled strong near-term demand for crude oil and low inventories at Cushing. It ended the day at $4.91.
Traders said that same dynamic also pushed U.S. cash crude “roll” prices as high as $5 a barrel on Wednesday, in turn vaulting the front-month futures contract up by nearly $1 to a session high of $103.34.
The “roll” period lasts for three days after the expiration of the front-month U.S. light crude contract. Traders and refiners adjust their crude slate during this period, and U.S. cash crude grades are priced against West Texas Intermediate (WTI) in Cushing.
Brent has fallen about 7 percent since mid-June as low profit margins have crimped European refiners’ demand for crude.
Fuel storage tanks that supply Tripoli were hit on Wednesday in clashes between rival Libyan militias, igniting a huge blaze near the international airport. The fighting is some of the worst in the capital since the 2011 war that ousted Libyan leader Muammar Gaddafi from power.
A spokesman for Libya’s National Oil Corp said production on Monday was 450,000 barrels per day, down from 555,000 bpd a few days earlier, partly because El-Feel oil field had reduced output because of the clashes in Tripoli. (Additional reporting by Rowena Caine and David Sheppard in London and Jacob Gronholt-Pedersen in Singapore; Editing by David Evans, Jane Baird and Peter Galloway)