U.S. Cash Crude-LLS rallies along with Brent

NEW YORK, Dec 16 (Reuters) - Differentials for LightLouisiana Sweet oil for January delivery at St. James,Louisiana, rose on Monday to their highest levels since Augustas buying interest emerged in line with a rally in Brent oilfutures, traders said.

LLS traded for as much as $5.25 a barrel over thefront-month U.S. oil futures contract, its highest spreadagainst WTI crude since Aug. 15, traders said. Differentialslater fell to end at $4.90 a barrel over benchmark futures.

Gulf Coast crude's discount to Brent, which hit a record atover $16 a barrel in late November, ended flat at around $8.09 abarrel on Monday, according to Reuters data.

A similar rally lifted Mars sour differentials totheir highest level since early September at 55 cents overbenchmark futures.

Brent futures settled $1.64 higher at $110.47 a barrel asthe January contract expired because of Libyan supplydisruptions and an emerging positive economic outlook in Europe.

Negotiations between the Tripoli government and a groupseeking autonomy in eastern Libya failed and the group said onSunday it will continue to block export ports.

Cash crude differentials were also reacting to sales basedon a year-end tax accounting system, dubbed Last in First Out(LIFO), which assumes barrels last to join a company's inventorywere sold first, one trader said.

Gulf Coast cash crude differentials mostly ignored the startof Royal Dutch Shell's reversed Houston-to-Houmapipeline that will have capacity to carry up to 360,000 bpd fromTexas to Louisiana.

The U.S. oil futures contract rose 88 cents to settleat $97.48 a barrel. Its discount to international Brent ended at $12.99 a barrel after hitting an intradayhigh of $13.72.

(Reporting by Selam Gebrekidan)