Oil prices rose to settle above $71 a barrel on Thursday, supported by better-than-expected economic data and a weaker U.S. dollar.

U.S. unemployment claims, which dropped to a nine-month low last week, bolstered confidence that the labor market was stabilizing.

A lower-than-expected unemployment figure in the U.S., resurgent commodities prices and a weaker U.S. dollar, and Alcoa's return to profitability all helped push equities and oil prices higher, said Peter Beutel, president of Cameron Hanover in New Canaan, Connecticut.

U.S. crude for November delivery settled at $71.69, up 2.12. The contract closed $1.31 lower at $69.57 a barrel on Wednesday.

In London, Brent crude settled at $69.77, up $2.57.

Aluminum producer Alcoa posted a surprise profit, while major retailers reported an uptick in September sales, lifting hopes for an economic recovery.

The dollar fell broadly against a basket of currencies as firmer equity markets fueled demand for riskier assets at the expense of the U.S. currency.

A weaker greenback supports oil because dollar-priced commodities become cheaper for buyers using other currencies.

But analysts urged caution over reading too much into positive economic data during the corporate earnings season. They noted that profits can be enhanced by spending cuts rather than increased revenue.

I'm still a little bit skeptical about these results, but it looks like investors are going to look through that and are going to accept cost-cutting earnings for now, said CMC Markets analyst James Hughes.

The gains in crude oil futures on Thursday reversed a nearly 2 percent drop in the previous session, when U.S. government data showed a larger-than-expected build in gasoline and distillate stocks last week, fanning doubts over the pace of fuel demand recovery in the world's largest energy consumer.

The Energy Information Administration reported on Wednesday that gasoline stocks rose by 2.9 million barrels last week, nearly three times the build that analysts had expected.

Distillate stocks, which include diesel and heating oil, rose by 700,000 barrels, more than double the forecast 300,000-barrel build.

(Additional reporting by Gene Ramos in New York and Joe Brock in London; Editing by David Gregorio)