* China Jan-Feb economic activity cools to multi-year lows
* China implied oil demand down 3.1 pct to 9.98 mln bpd
* U.S. jobless claims fall to 3-month low
* U.S. surprises oil market with sale from strategic reserve
* Russia restarts military exercise near Ukraine border (Updates with settlement prices)
By Elizabeth Dilts
NEW YORK, March 13 (Reuters) - Brent crude oil futures fell on Thursday as weaker-than-expected Chinese economic data offset worries over potential supply disruptions that could be prompted by the stand-off between Russia and Western powers over Ukraine.
U.S. crude futures rose slightly, as positive retail sales and labor market data raised optimism about the economy and outweighed concerns over China.
Data from China showed growth in investment, retail sales and factory output all fell in the first two months of the year to multi-year lows in the world's second largest consumer of oil, amplifying worries about a slowdown.
"The weak economic numbers and exports out of China in the last week are driving prices lower," said Oliver Sloup, director of managed futures with iitrader.com in Chicago.
The Ukraine conflict looked poised for another escalation as Germany's Angela Merkel warned Moscow it risked "massive" political and economic damage if it didn't change course. Russia responded by starting military exercises near the border with Ukraine.
The conflict has provided global oil markets support in recent weeks because traders worry it could lead to a disruption of oil supplies from Russia, one of the world's largest oil producers.
U.S. retail sales rebounded in February and new applications for unemployment benefits hit a three-month low last week, suggesting some strength in the economy after harsh weather abruptly slowed activity.
U.S. crude rose 21 cents to settle at $98.20 a barrel. Brent crude fell 63 cents to settle at $107.39 a barrel.
Thursday's slight rise in U.S crude came after the American benchmark plunged more than 2 percent on Wednesday to its lowest level since January, after the government surprised markets by announcing a test release from its strategic petroleum reserve, and weekly inventory data showed a larger-than-expected rise in crude stockpiles.
The DOE's test sale of crude from its emergency stockpile is the first since 1990. The United States is offering a modest 5 million barrels in what some observers saw as a message to Russia from the Obama administration.
In China, implied oil demand fell 3.1 percent in the January-February period from a year earlier to roughly 9.98 million barrels per day (bpd), according to Reuters' calculations based on preliminary government data.
The Organization of the Petroleum Exporting Countries on Wednesday reported world oil demand would increase more than expected in 2014, raising its forecast for a second straight month as economic growth picks up in Europe and the United States. (Additional reporting by Robert Gibbons in New York and Simon Falush in London.; Editing by Jason Neely, Jane Baird, Andre Grenon and Chris Reese)