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UPDATE 6-U.S. crude oil rises on strong GDP data

Elizabeth Dilts
Thursday, 30 Jan 2014 | 2:12 PM ET

* U.S. Q4 2013 GDP rises at 3.2 percent annual rate

* China slowdown caps Brent gains

* U.S. crude discount to Brent oil compresses

* Federal Reserve reduces economic stimulus

(Adds U.S. GDP data, updates prices; changes byline and dateline, previous LONDON)

NEW YORK, Jan 30 (Reuters) - U.S. crude oil rose about $1 on Thursday after government data showed solid economic growth in the fourth quarter of last year and as cold weather was expected to boost oil demand.

Gross domestic product in the U.S. grew at a 3.2 percent annual rate, the Commerce Department said, a far stronger performance than economists anticipated earlier in the quarter and a bullish sign for energy demand.

The arctic chill held its grip on the U.S. Midwest and Northeast, driving a larger-than-expected draw on U.S. distillates stocks including heating oil, government data from Wednesday showed.

Brent crude traded slightly higher, boosted by concerns over supply interruptions from Libya and expected declines in OPEC production. However, growing evidence of a fuel demand slowdown in the second-biggest oil consumer, China, capped gains.

BP announced Thursday it dropped plans to invest in a refinery in China, making for the fourth refining project in recent months to fall foul of a slowdown in growth in the country.

Libya's deputy prime minister survived an assassination attack on Wednesday in a reflection of the violent chaos that continues to destabilize the North African country, though support appears to be waning for rebel groups that have held control of several oil exporting ports.

"Crude is reacting to the good GDP numbers that came out this morning and the expectation that the cold weather will translate into greater demand for crude," said Andrew Lipow, president of Lipow Oil Associates in Houston.

"It's also the prevailing opinion that world oil inventories have been declining, and Brent continues to be supported by supply disruptions in Iraq, Libya and Nigeria."

U.S. crude was up 93 cents to $98.29 at 12:56 p.m. EST (1756 GMT), after earlier reaching $98.59, its highest since Dec. 31.

Brent crude was up 16 cents to $108 a barrel after reaching a high of $108.30 earlier in the session. It settled 44 cents higher at $107.85 Wednesday.

U.S. crude's discount to Brent oil narrowed 77 cents to $9.72.

U.S. ultra-low sulfur diesel (ULSD), commonly known as heating oil, was up 1.4 cents to $3.1947 per gallon. ULSD settled higher two of the last three days.

U.S. DATA RESONATES

Consumer spending was the main driver of U.S. fourth-quarter GDP growth, but there was also a strong boost from trade. Business investment also lent support as did the restocking of warehouses, but not at the same scale as in the third quarter.

The advance fourth-quarter GDP was released a day after the Federal Reserve announced it would further taper the size of its stimulus program because "growth in economic activity picked up in recent quarters."

A pullback in stimulus is expected to strengthen the dollar, which typically weighs on dollar-priced commodities such as oil. Analysts attributed a U.S. crude oil futures' rally to the strength of oil products.

"The Fed is talking about strong economic fundamentals," said Richard Hastings, a strategist at Global Hunter Securities. "For commodities, trade is stable and as long as exports continue to hang out and drift higher, the underlying commodities price remains bullish."

Wednesday's EIA data showed U.S. distillate stocks, including heating oil and diesel fuel, fell 4.6 million barrels last week, far greater than analysts predictions of a 2.2 million barrel drop.

(Additional reporting by Simon Falush in London and Manash Goswami in Singapore; Editing by William Hardy and Chris Reese)