SINGAPORE (Reuters) - Brent crude futures rose on Tuesday to stand close to $112 on expectations of steady demand growth after the world's second-largest oil consumer, China, posted an economic expansion that beat forecasts.
The data eased oil investor worries that Europe's debt crisis is forcing China's factories to pare output and reduce energy consumption. The latest numbers are another prop for prices that have hovered around $110 a barrel since the beginning of the year, fuelled by escalating tension in the Middle East over Iran's nuclear programme.
Brent crude rose 59 cents to $111.93 a barrel by 0404 GMT, gaining for a second day. U.S. crude rose $1.26 a barrel to $99.97. There was no settlement price for the benchmark because of a holiday in the United States on Monday.
"China's data is encouraging, the numbers have been good across the board and that is supportive of oil," said Ben Le Brun, market analyst at OptionsXpress. "It shows that the fallout from the European crisis has not been as bad as expected."
Asian shares, the euro, base metals and gold all rose as markets viewed the Chinese data as a sign the growth momentum in the world's second-biggest economy was intact.
China posted fourth-quarter growth of 8.9 percent on the year. While the expansion was the weakest pace in 2-½ years, it was stronger than a prediction of 8.7 percent made by economists in a Reuters poll.
The country's implied oil demand climbed to an all-time high of 9.64 million barrels per day in December, up 0.4 percent from a year earlier and wound up 2011 with 6.8 percent growth, calculations based on preliminary government data showed.
Assuring markets there would be sufficient supplies to meet demand, Saudi Arabia Oil Minister Ali al-Naimi told CNN in an interview Riyadh could increase production by about 2 million barrels per day (bpd) "almost immediately." Comments from the world's top oil exporter come a day after Iran warned Gulf producers not to compensate for any disruption of exports from the Islamic Republic due to sanctions.
Tehran faces growing isolation over its nuclear programme, with the United States pressuring top consumers from China to Japan to stop buying Iranian oil.
"The Middle East situation is just increasing the risk premium on oil. It is supporting prices," Le Brun said.
Supply concerns have eased somewhat after Nigerian trade unions called off strikes and protests that threatened to shut down output in Africa's biggest oil producer.
EURO ZONE
Market participants remain worried about global demand growth as Europe struggles to tackle the region's debt crisis. The worsening of the region's financial problems may impact other major economies and stifle energy demand.
U.S. rating agency Standard & Poor's cut its credit rating of the euro zone's EFSF rescue fund on Monday. The agency said in a statement the decision was all but inevitable following identical cuts three days earlier to the creditworthiness of France and Austria, two of the fund's guarantors.
Broader markets have so far shrugged off the move, with European shares and the euro recovering on Monday and a debt auction by France drawing firm investor demand.
"Risk markets successfully negotiated their first minor hurdle for the week when, as generally expected, French note auctions revealed no immediate impact from the one-notch rating downgrade by S&P," Ric Spooner, chief market analyst at CMC Markets, said in a report.
A bearish target at $108.75 per barrel remains unchanged for Brent, while U.S. oil will revisit a January 13 low of $97.70 per barrel, as it could have completed a rebound from this level, Reuters market analyst Wang Tao said.
