* Investors cautious after Spain bond auction
* Concern about supply from Iran supports market
* Global growth seen subdued, Reuters poll shows (Previous SINGAPORE, updates prices)
LONDON, April 20 (Reuters) - Oil rose back above $118 a barrel on Friday, trimming its weekly decline, as the impact of sanctions on Iranian supply countered nervousness about the euro zone debt crisis and the strength of global growth.
Oil buyers in Japan and Europe are cutting purchases of Iranian crude in April, industry sources said this week, adding to signs Western sanctions are curbing sales from the major oil exporter.
Brent crude gained 55 cents to $118.55 a barrel by 0839 GMT, heading for a weekly loss of about 2 percent. U.S. crude added 53 cents to $102.80, mostly unchanged from a week ago.
"I think we've marked the bottom of this downward move," said Christopher Bellew, a broker at Jefferies Bache in London. Support for Brent is coming from "the impact of sanctions on Iran and probably, once refineries come out of turnaround, quite a tight supply situation," he said.
Brent's weekly decline was earlier on Friday on track to be the steepest in absolute terms since mid-January, on concern about the economy and the outlook for demand.
A Spanish bond sale on Thursday failed to ease concerns about the sustainability of the country's debt, while a U.S. employment report suggested a slowdown in job creation, dimming the outlook for oil demand.
"The Spain sovereign debt auction went rather well, but the European economy is still very unstable which is affecting Brent prices," said Yusuke Seta, a Tokyo-based broker at Newedge.
According to Reuters polls on Thursday, the global economy is set to expand by 3.3 percent this year, slower than the International Monetary Fund's 3.5 percent growth estimate.
Concern about possible supply shortages as Western sanctions target exports from Iran helped to send Brent to above $128 a barrel in March, the highest since 2008.
Helping to allay those concerns, top world exporter Saudi Arabia is pumping crude at the highest rate in decades and its Oil Minister Ali al-Naimi said on April 13 the kingdom was "determined" to see a lower oil price.
Talks between world powers and Iran over its nuclear programme have also eased the upward pressure on prices. A second round of discussions is scheduled to take place in Baghdad on May 23.
U.S. crude remained supported on expectations that an oil glut in the U.S. Midwest would ease with an earlier-than-scheduled plan to reverse the flow of the Seaway crude pipeline.
Brent's premium to U.S. crude CL-LCO1=R was trading at just above $15 a barrel on Friday, having weakened from almost $22 on April 5. (Reporting by Alex Lawler and Jessica Jaganathan; Editing by William Hardy)
