(Updates with Brent settlement in paragragh 3.)

By Joshua Schneyer

NEW YORK (Reuters) - Oil rose to a seven-week high
near $80 a barrel Thursday after lower U.S. jobless claims
stoked optimism for economic recovery in the world's top oil
consumer and as military and police protests thrust OPEC-member
Ecuador into political unrest.

U.S. oil futures settled up $2.11 at $79.97. Oil
posted an 11.2 percent gain in September, the largest monthly
jump since May 2009. Oil rose 5.7 percent during the third
quarter, which ends Thursday.

Oil trading volumes were moderate. European benchmark Brent
crude futures settled up $1.54 to $82.31 a barrel.

"Crude prices are really latching on to any indication of
improving oil demand going forward," said Matt Smith, analyst
with Summit Energy in Louisville, Kentucky.

New U.S. jobless benefit claims fell more than expected
last week, signaling a potential job market recovery, while
second-quarter U.S. growth was revised up to 1.7 percent from
an earlier estimate of 1.6 percent.

In Ecuador, an OPEC member country which typically exports
around 300,000 barrels per day of crude, police and military
personnel went on strike to protest cuts in public sector
benefits and pay and thrust the country into political chaos.

Military troops, some with banners demanding government
benefits, closed off Ecuadorean airports. President Rafael
Correa, who accused rivals of seeking to stage a coup, said he
had been injured by protesters in a skirmish.

Correa is considering dissolving Ecuador's Congress and
ruling by decree, one of his government ministers said. Top
military brass declared their loyalty to Correa, and state oil
company PetroEcuador said the country's oil installations were
not affected by the unrest.

"(Ecuador is) certainly a situation that bears watching,"
said Tom Bentz of BNP Paribas in New York.

"If there was a complete shutdown of operations for a period
of time it could have an effect. But markets are certainly not
in short supply right now, so the effect could be muted."

The Institute for Supply Management-Chicago Thursday
said its U.S. Midwest business activity index rose in September
to the highest since July, beating expectations.

The U.S. dollar strengthened, U.S. stock markets dropped,
and several other commodities weakened on Thursday, factors
that may have limited further gains in the oil market.

The U.S. dollar firmed against a basket of foreign
currencies. A stronger dollar can limit gains in oil,
making the commodity which is priced in dollars more expensive
for holders of foreign currency.

Weekly data Wednesday showed larger-than-expected
drawdowns in crude and refined product inventories in the
United States.

Oil stocks at Cushing, Oklahoma, the delivery point for
NYMEX crude futures, fell in the week to Sept. 28 to their
lowest weekly level since late April, according to energy
industry data provider Genscape.

Thursday's oil price rise outpaced other commodities, which
mostly fell. The Reuters-Jefferies CRB index fell after
hitting an eight-month high on Wednesday, but was poised to end
the third quarter up about 10 percent.

HEATING OIL

NYMEX heating oil futures rose 2.4 percent and were set to
be the strongest performers in the oil futures complex for
September. They outpaced gains in crude oil and gasoline on
strong export demand for distillates, according to Reuters
data.

ICE gas oil, Europe's benchmark for diesel and heating oil,
was trading 3.9 percent higher.

Brokers said some support came from a French rolling port
strike at the country's strategic Fos-Lavera oil hub near
Marseille, which entered its fourth day and threatened
operations at French and Swiss refineries.

The strike blocked a total of 24 oil tankers, the port
authority said.
(Additional reporting by Robert Gibbons and Gene Ramos in New
York, Zaida Espana and Ikuko Kurahone in London, Hugh Bronstein
in Quito and Florence Tan in Singapore; editing by Jim
Marshall)