(Updates prices; adds analyst quotes in paragraphs 9,10)
* Mideast tension stokes supply worries
* China official PMI slightly lower than expected
* Coming Up: U.S. nonfarm payrolls; 1330 GMT
By Jessica Jaganathan
SINGAPORE, Feb 1Brent crude hovered on Friday
above $115 a barrel, its highest level in more than three
months, as escalating tension in the Middle East stoked supply
Brent is set for its biggest weekly gain in two months,
while U.S. crude is on track to rise for an eighth straight
week, matching a similar winning streak in July-August 2004.
But disappointing economic data from China, the world's
second largest oil consumer, capped gains. The official
purchasing managers' index (PMI) missed market expectations,
underscoring that the economy is making only a mild recovery
from its weakest year since 1999.
Brent had risen 27 cents to $115.82 a barrel by 0552
GMT, after an earlier high of $115.91 marking its highest since
mid-October. U.S. crude edged up by 8 cents to $97.57.
The spread between Brent and U.S. crude widened by 19 cents
to minus $18.25 on concerns about rising crude stockpiles in the
U.S. Midwest, and as the Seaway pipeline operator said it would
be the second half of the year before it completes a lateral
pipeline from its Jones Creek terminal in Texas.
"I would have thought that PMI data just might have taken
some of the gloss off risk assets across the board," said Ben Le
Brun, market analyst at Sydney-based OptionsXpress.
"Perhaps there's a little bit more to play out in terms of
oil. It wouldn't surprise me to see traders pay back some of the
gains for the week a little bit this afternoon."
Prices also got some support from a private survey released
by HSBC showing that growth in China's giant manufacturing
sector hit a two-year high in January, backing expectations a
rebound would be led by domestic demand rather than exports.
"If the Chinese PMI readings today were disappointing it was
only mildly so," Tim Waterer, senior trader at CMC Markets, said
in a note.
"It is almost a case of 'take your pick' as to which PMI
number (the government one or the HSBC one) is the most accurate
reflection of the manufacturing story in China, with bullish
traders likely to focus on the HSBC reading, while the bears
will place more stock on the official reading."
Investors will be keeping an eye on U.S. nonfarm payroll
data, due at 1330 GMT, for further clues on the strength of the
global economy and signs that sluggish fuel demand will improve.
The numbers are expected to show a rise of 160,000 jobs and a
steady unemployment rate.
"If (the U.S. nonfarm payroll data) misses expectations then
I would expect a little bit of that premium to come off oil
prices," Le Brun said.
The U.S. Federal Reserve this week left in place its
bond-buying stimulus plan, known as quantitative easing,
bolstering hopes for economic growth.
"Brent has had a phenomenal run in recent times ... after
the announcement of 'QE3', oil was not performing quite as
strongly as some analysts were predicting, so maybe it's just
playing a bit of catch-up now from the fact that the Fed has
reiterated its bond buying program," Le Brun added.
Supply worries stemming from conflict in the Middle East
buoyed prices of Brent, the main gauge for global oil prices.
Syria protested to the United Nations on Thursday over an
Israeli air strike on its territory and warned of a possible
U.S. Secretary of State Hillary Clinton urged Iran and
Russia on Thursday to rethink their support for Syria, saying
the most dire scenarios of the conflict spilling beyond its
borders could come to pass.
Clinton told reporters there were signs Iran was sending
more people and increasingly sophisticated weaponry to support
Syrian President Bashar al-Assad in his 22-month battle against
rebels seeking to end his family's four decades of authoritarian
Tension over Iran's uranium enrichment plan continued to
bubble after a plan to upgrade its refining equipment was
delivered to the U.N. nuclear agency.
(Editing by Joseph Radford; Editing by Clarence Fernandez)