* Chinese manufacturing expansion grows for 1st time in 13 mths
* Supply concerns ease on Israel, Hamas ceasefire, doubts remain
* Euro zone economy outlook darkens, but some feared worse (Changes dateline, updates throughout)
By Jessica Donati
LONDON, Nov 22 (Reuters) - Oil dipped below $111 per barrel on Thursday, as concerns over supply eased after a ceasefire took effect in the Gaza Strip, but uncertainty over its success and a recovery in Chinese manufacturing offered support.
Israel and the Islamist Hamas movement agreed to an Egyptian-sponsored ceasefire late on Wednesday to halt the eight-day conflict around Gaza kept a lid on oil price gains.
Although Israel is not an oil exporter, concern that oil-producing nations in the Gulf could become involved in the conflict around Gaza has led to fears of supply disruption.
"I think it will last - Brent should fall on that - but it seems as the market is pretty sceptical," said Thorbjørn Bak Jensen, an analyst at A/S Global Risk Management.
Brent crude futures slipped 34 cents to $110.52 a barrel by 0938 GMT, after earlier rising to a high of $111.17. U.S. crude was unchanged at $87.38 a barrel.
China's vast manufacturing sector saw expansion accelerate in November for the first time in 13 months, according to a factory survey.
An uptick in economic activity indicators in October has cemented the view that a rebound in China's economy gathered momentum as it entered the fourth quarter, helped by a raft of pro-growth government policies in recent months.
But analysts expected the pace of recovery to be modest in the fourth quarter.
"I'm surprised Brent is so high ... there are a lot of predictions that all the weakness in China will eventually get sorted as the new leadership takes over, but it seems like they're not in a huge hurry to over-stimulate," said Tony Nunan, a risk manager at Mitsubishi Corp.
ECONOMIC OUTLOOK
The outlook for Europe in contrast was far bleaker, with business surveys showing on Thursday the euro zone economy is on course for the worst quarter since the dark days of early 2009.
The United States, the world's top oil consumer, reported positive economic data on Wednesday. Manufacturing grew in November at its quickest pace in five months, with a rise in domestic demand hinting that factories could provide a boost to growth in the fourth quarter.
Adding support for oil prices, total U.S. crude oil inventories fell unexpectedly according to a government report on Wednesday, dropping by 1.47 million barrels in the week to Nov. 16, against analyst forecasts of a 900,000 barrel build.
Investors monitored U.S. discussions on the "fiscal cliff" - $600 billion worth of tax increases and spending cuts set to begin in 2013 that could push the economy into recession.
"The whole euro zone situation still remains unresolved, so I think what people are looking for now is for the U.S. to lead the world economy out of its slump. So the big concern is the fiscal cliff. So I think after the holiday, the discussion will be on the U.S. budget," Tony Nunan of Mitsubishi Corp said.
U.S. stock markets were closed for the Thanksgiving holiday on Thursday. (additional reporting by Jessica Jaganathan in Singapore; Editing by William Hardy)
