* China Q4 GDP growth 8.9%, Dec factory output up 12.8%
* Boost to sentiment sends investors into riskier assets
* German ZEW economic sentiment makes biggest ever jump (Adds German ZEW result, updates prices)
By Claire Milhench
LONDON, Jan 17 (Reuters) - Oil prices rose above $112 on Tuesday, supported by a weaker dollar and by expectations of steady demand growth after China, the world's second-largest oil consumer, posted stronger-than-expected economic growth.
Brent crude futures were up $1.28 at $112.62 a barrel by 1122 GMT, gaining for a second day.
U.S. crude rose $2.17 a barrel from Friday's closing price to $100.87. There was no settlement price for the benchmark on Monday because of a U.S. holiday.
Analysts and traders said China's 8.9 percent fourth-quarter GDP growth had helped lift commodities and equities.
Although the growth figure was the weakest in two and a half years, it was still better than a forecast of 8.7 percent made by economists in a Reuters poll.
"There is general positive market sentiment today - it's not just oil which is up today, it is almost everything," said Carsten Fritsch, an oil analyst at Commerzbank in Frankfurt.
Asian and European equities, base metals, the euro and gold all rose as markets viewed the Chinese data as a sign that growth momentum in the world's second-biggest economy remained intact.
"Yesterday OPEC warned that the eurozone debt crisis could have a negative impact on oil demand in emerging economies, but those fears have receded because of this Chinese data," said Fritsch.
Investors had been concerned that Europe's debt problems would reduce demand for Chinese goods, forcing China's factories to pare output and reduce energy consumption.
But China'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 finished 2011 with 6.8 percent growth.
Fritsch added that there was some talk in the market that China could ease monetary policy because the data still showed growth slowing.
Oil was also supported by a weaker dollar, with the U.S. currency down 0.79 percent against a basket of currencies at 1116 GMT as the Chinese data encouraged investors to embrace riskier assets.
Investors were also cheered by the biggest rise in German analyst and investor sentiment ever recorded, with a reading from the Mannheim-based ZEW economic think tank for January of -21.6 from -53.8 in December.
The jump was attributed to upbeat economic data as well as the European Central Bank's massive injection of cash last month, which has left banks awash with money.
Market participants continue to follow Iranian developments, with fears of tighter supply currently outweighing concerns stemming from the euro zone debt crisis.
"We are in a sideways range in oil prices," said Commerzbank's Fritsch. "We have supporting factors like geopolitical risk regarding Iran and the downside risk from the euro zone debt crisis. Depending on which has the upper hand, prices are going up or down."
Tehran faces growing isolation over its nuclear programme, with the United States pressuring top consumers including China and Japan to stop buying Iranian oil.
Conversely, supply concerns about Nigerian crude have eased somewhat after trade unions called off strikes and protests that threatened to shutdown output in Africa's biggest oil producer. (Additional reporting by Manash Goswami in Singapore, editing by Jane Baird)
