Oil strikes 2014 peak

Oil rallied Thursday to the highest level so far this year, propelled by the weak dollar, upbeat jobless claims data and strong heating fuel demand in the United States.

US benchmark West Texas Intermediate (WTI) for delivery in March jumped as high as $98.83 per barrel. It later stood at $98.16, up 78 cents from Wednesday.

Brent North Sea crude for March rose 58 cents to stand at $106.83 a barrel in afternoon London deals.

The oil market extended gains after US data showed weekly new claims for unemployment insurance fell to 331,000 from 351,000 the previous week.

The bright data weighed on the greenback, which makes dollar-priced crude cheaper for buyers using stronger currencies. That tends to boost demand and prices.

Crude futures also won solid support on stronger demand for heating fuel in the United States as the country grapples with severe winter, dealers said.

"The 20,000 drop in weekly jobless claims has helped weaken the US dollar and push US oil prices to four-week highs as another snow storm gets ready to hit the Eastern United States," said analyst Michael Hewson at trading firm CMC Markets UK.

"This has helped drag Brent prices higher along with it, even though todays European economic data was disappointing, with German factory orders sliding 0.5 percent in December."

The improvement in US jobless claims, a sign of the pace of layoffs, came a day ahead of the Labor Department's January job growth and unemployment data.

The oil market had risen on Wednesday after a closely-watched US oil inventories report suggested severe winter weather across large parts of the country was pushing up demand for heating oil.

Stockpiles at the trading hub in Cushing, Oklahoma, sank 1.5 million barrels, the Department of Energy (DoE) said on Wednesday, indicating strong demand and lifting oil prices.

US commercial crude reserves rose 400,000 barrels in the week ending January 31, the DoE added, much smaller than the average analyst estimate of 2.2 million.

But traders focused on the fourth straight week of declines in distillates, which include diesel and heating oil.

Distillates fell 2.4 million barrels, far more than the 2.0 million barrels estimated.

"Freezing conditions continue across the States, supporting heating oil demand," said analyst Lucy Sidebotham at British-based energy consultancy Inenco.

Treacherous snow and freezing rain struck the northeastern United States on Wednesday, disrupting thousands of flights and causing traffic chaos for millions.

More than 600,000 people were without power as high winds and ice knocked down trees and electrical lines.

Most were in Pennsylvania, but New Jersey and New York also experienced significant outages.

A state of emergency was declared in New Jersey and New York, where dwindling reserves of salt -- used to melt snow and road ice -- was a problem.

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