* China's Jan-Feb economic activity cools to multi-yr lows * China's Jan-Feb implied oil demand down 3.1 pct on yr to 9.98 mln bpd * U.S. surprises oil market with sale from strategic reserve * EU moves toward sanctions on Russians, Obama meets Ukraine PM (Recasts, adds China's factory output, comments, updates prices) By Manash Goswami SINGAPORE, March 13 (Reuters) - Brent futures held above $108 a barrel on Thursday as investors focused on risks from the unfolding crisis in Ukraine, which overshadowed latest China data showing factory output in the world's second-biggest oil consumer lagged forecasts. The U.S. contract plunged more than 2 percent overnight in its biggest drop in two months on a surprise plan for a test release of strategic oil reserves, while weekly data showed a big rise in crude stockpiles. Yet, prices held on to earlier gains even though China's economy slowed markedly. Brent crude rose 21 cents to $108.23 by 0746 GMT, after ending 53 cents down at its lowest in a week. U.S. crude gained 9 cents to $98.08, after settling $2.04 weaker at $97.99, below the 50-day moving average of $98.32. "The Chinese economic data is weak, but it looks like the China is having less of an impact on the market right now and the focus is now on Ukraine," said Yusuke Seta, a commodity sales manager at Newedge in Tokyo. "The Chinese economy has a few more steps to take until it starts recovering. That will put a cap on oil prices." Seta sees strong support for Brent at $107.50 a barrel, with the U.S. benchmark set for more volatility amid rising domestic output and sliding seasonal demand as refiners shut units for maintenance. The U.S. contract will swing between $95 and $100 a barrel through next week, he said. Apart from China's growth in investment, retail sales and industrial output, all slumping to multi-year lows, the nation's implied oil demand in the January-February period of this year fell 3.1 percent from a year earlier to roughly 9.98 million barrels per day (bpd), according to Reuters' calculations based on preliminary government data. But oil, particularly Brent, is drawing support from the unfolding crisis in Ukraine. The European Union agreed on a framework on Wednesday for its first sanctions on Russia since the Cold War, a stronger response to the Ukraine crisis than many expected and a mark of solidarity with Washington in the drive to make Moscow pay for seizing Crimea. Also underpinning oil is an expectation U.S. fourth-quarter growth is likely to be revised higher after services industry data suggested a much stronger pace of consumer spending than the government had previously assumed. "I am quite optimistic about the global economic recovery, led by the United States" said Ben Le Brun, a market analyst at OptionsXpress in Sydney. "That will support oil in the longer term given that the United States is the biggest consumer." OUTLOOK World oil demand will increase more than expected in 2014, OPEC said, raising its prediction for a second straight month as economic growth picks up in Europe and the United States. In a monthly report, the Organization of the Petroleum Exporting Countries (OPEC) said global demand will rise by 1.14 million barrels per day (bpd) this year, up 50,000 bpd from its previous forecast. The United States announced the first test-sale of crude from its emergency oil stockpile since 1990. It is offering a modest 5 million barrels in what some observers saw as a subtle message to Russia from the Obama administration. "We are seeing some snap-back reaction because the market is seeing the strategic sale as a one-off at this point, barring any emergencies," said Le Brun from OptionsXpress. (Reporting by Manash Goswami; Editing by Ed Davies; Richard Pullin and Anupama Dwivedi)

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