LONDON (Reuters) - Oil prices rose on Tuesday on concerns over supply from Iran and South Sudan and hopes that a Greek debt deal and European budget agreement would help support stronger economic growth. Investors are worried about oil supplies from OPEC's second-largest producer, Iran, as the United States considers more sanctions on top of a European embargo on Iranian oil to step up pressure on Tehran to halt its nuclear programme. South Sudan's decision to keep its production shut in a transit fee dispute with former civil war foe Sudan added to the supply worries. ICE Brent crude for March was up 90 cents at $111.65 a barrel by 0855 GMT, on course to rise around 3.5 percent in January. U.S. March crude jumped $1.11 to a high of $99.89 before easing back slightly to trade at $99.85. "Iran will make sure we see more upside than downside," said Jeremy Friesen, a commodity strategist at Societe Generale. The oil market gained support from across-the-board rises in Asian and European stock markets after Greek Prime Minister Lucas Papademos raised hopes that a deal would be reached this week to avoid a potentially chaotic debt default. Luxembourg's Finance Minister Luc Frieden suggested Greece and its private creditors were close to a debt restructuring deal. The dollar fell 0.3 percent against a basket of major currencies, remaining under pressure after the U.S. Federal Reserve said last week it was likely to keep interest rates near zero at least until late 2014. Dollar-denominated oil becomes cheaper to holders of other currencies when the greenback weakens. IRAN The EU's embargo on Iranian oil exports will add upward pressure to oil prices, OPEC's secretary general told Reuters on Monday, even though there is no shortage of oil on the market. Lawmakers on the U.S. Senate Banking Committee plan to vote on a new round of sanctions targeting Iran's energy sector. The package comes on the heels of new banking sanctions that the Obama administration is only beginning to implement as well as tough new embargos by European nations. In Africa, South Sudan kept oil production shut even as Sudan released four tankers loaded with South Sudanese oil to try to defuse a row over export transit fees. The euro zone debt crisis has threatened to slow down growth in the United States and China, the world's top two oil consumers. Europe moved a step closer to a fiscal union on Monday although differences over the limits of austerity and Greece's unfinished debt restructuring talks hampered efforts to convey a more optimistic message that Europe is getting on top of its debt crisis. "I'm confident that the European Union is moving in the right direction," Societe Generale's Friesen said. "But the way forward is murky and we're muddling through." "It's hard to see oil rally unless the economy heals itself quickly." Analysts are expecting a second straight weekly rise in U.S. crude oil inventories on more imports, a preliminary Reuters poll showed. (Additional reporting by Florence Tan in Singapore; editing by Jason Neely) ( Enjoy Moneycontrol.com on iPad and be prepared for a fantastic experience. Get real time stock quotes, interactive charts, market buzz, and watch CNBC-TV18, CNBC Awaaz live on your iPad. Check out the free moneycontrol app. Click here to download now )

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