UPDATE 7-U.S. crude pares losses on diesel demand, China weighs

* U.S. crude oil stocks rise 973,000 barrels -EIA

* Cushing stocks fall 1.73 mln barrels -EIA

* China Feb manufacturing activity slowest in 7 months -HSBC

* Brent-WTI spread narrowest since October

(Rewrites top, adds EIA data, analysts' comments)

NEW YORK, Feb 20 (Reuters) - U.S. crude oil pared losses and was little changed on Thursday after government data showed that frigid weather continued to fuel robust heating oil demand, countering weak Chinese economic data.

Sustained cold and forecasts for more snow drove distillate inventories to fall by another 339,000 barrels in the week to Feb. 14, according to data from the U.S. Energy Information Agency.

Crude stocks at the Cushing, Oklahoma, hub fell by an expected 1.73 million barrels as a new pipeline has been draining excess supply from Cushing, the WTI contract's delivery point, to the Gulf Coast, which has provided support for prices.

Other data released Thursday showed U.S. manufacturing activity in February grew by the most in four years and unemployment benefits fell for a second week in a row, also bullish for U.S. oil.

"As long as the inventories are low, products prices will remain elevated and that will lift U.S. crude prices," said Richard Hastings, macro strategist at Global Hunter Securities.

Capping gains in U.S. crude and pushing Brent prices lower was poor economic data from China that showed manufacturing activity shrank in February to the lowest in seven months, and employment fell at the fastest pace in five years.

"For the moment the fundamentals are possibly starting to change and become less supportive for the current elevated oil price structure, while the economic data from most locations around the world have been disappointing and starting to suggest a slowing of the global economy, including China," said Dominick Chirichella of New York's Energy Management Institute.

Brent was down 35 cents at $110.12 a barrel at 12:49 p.m. EST (1749 GMT) after settling at its highest price of 2014 on Wednesday.

U.S. crude oil for March delivery, which expires at the settlement on Thursday, fell 8 cents to $103.23. U.S. crude for April delivery, which will become the front month contract on Friday, was 2 cents lower at $102.82.

April Brent's premium to U.S. crude <CL-LCO1=R> narrowed to $7.09 earlier in the session, its tightest point since Oct. 9. It last traded at $7.18.

U.S. ultra-low sulfur diesel (ULSD), commonly known as heating oil, rose 1.5 cents to $3.1624.


Political risks in Africa and Venezuela party offset the negative impact on oil from the China survey. Domestic unrest has cut crude output in Libya and South Sudan, and dealers are keeping a watchful eye on protests in Venezuela.

Investors are also tracking Iran's nuclear talks.

Six world powers and Iran made a "good start" during talks in Vienna towards reaching a final settlement to the decade-old standoff over Tehran's nuclear program, an EU official said.

A final resolution could lead to a full lifting of sanctions that have curbed oil exports from the OPEC producer.

(Additional reporting by Florence Tan; in Singapore; Editing by David Evans, Dale Hudson and Peter Galloway)