U.S. crude gained more than $1 a barrel on Thursday as data showed an unexpected drop in U.S. unemployment benefits and the dollar weakened.

Brent oil rose modestly, but the restart of a North Sea pipeline system limited gains for the London-traded benchmark crude.

The drop in last week's initial claims for U.S. unemployment benefits stoked optimism about the pace of recovery in the world's largest economy.

The euro firmed after the European Central Bank left its benchmark interest rate unchanged and a successful Spanish debt auction eased some investor concern about the euro zone. The dollar index declined by nearly 0.5 percent. A weaker greenback can boost demand for dollar-denominated commodities such as oil.

Brent rose 9 cents a barrel to settle at $111.15. U.S. crude gained $1.13 to settle at $91.56 per barrel. That drove down Brent's premium versus U.S. crude to $19.59 per barrel, from $20.63 on Wednesday.

"U.S. jobless claims data and the ECB's move are helping U.S. oil futures to rebound from a two-month low earlier this week," said Gene McGillian at Tradition Energy in Connecticut. He attributed Brent's poorer performance on Thursday to the pipeline restart.

The 80,000-barrels-per-day North Sea Brent pipeline system shut on Saturday, the second Brent pipeline outage in two months.

Production of North Sea Forties crude was also seen rising, with some 400,000 bpd set to load in April, up from 368,000 bpd in March, according to loading programs.

Crude futures had fallen on Wednesday after a U.S. government report showed that domestic crude inventories rose by 3.83 million barrels last week, much more than the 500,000-barrel increase expected in a Reuters poll of analysts.

Market participants are awaiting February trade data from China scheduled for release on Friday, including crude demand numbers, and the U.S. February nonfarm payrolls report that will follow at 8:30 a.m. EST (1330 GMT).

(Additional reporting by Robert Gibbons in New York, Alex Lawler in London and Ramya Venugopal in Singapore; Editing by Grant McCool and Dale Hudson)