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NEW YORK (Reuters) - Brent crude prices hovered near unchanged on Tuesday as concerns about Europe's economy after credit downgrades in the region last week highlighted the risk to oil demand and countered support from the weaker dollar and better-than-expected Chinese data on economic growth.
U.S. crude held on to its stronger gains, after Brent's expiring February contract rose 76 cents on Monday while its U.S. counterpart only saw electronic trade for Tuesday trade date due to a holiday.
"Most of it is WTI playing catch-up from the holiday," added John Kilduff, a partner at hedge fund Again Capital in New York. "Brent looks to be reflecting the euro zone concerns. The China GDP was good, but exports were down and that highlights the slowdown in Europe."
China's economy grew at 8.9 percent in the fourth quarter of 2011 and though this was better than the forecast of 8.7 percent made by economists in a Reuters poll, it was the weakest pace in 2-1/2 years.
The slowing growth revealed in the GDP data had some traders and investors hopeful that the Chinese might begin monetary easing.
China's crude imports graphics: r.reuters.com/kav85s
For a 24-hr technical outlook on Brent: r.reuters.com/xax95s
Euro zone crisis in graphics r.reuters.com/hyb65p
Graphic on crude imports and exposure to Iran link.reuters.com/dab65s
Adding to support for oil early on Tuesday, German analyst and investor sentiment recorded its biggest ever rise, with a January reading of -21.6 from the Mannheim-based ZEW economic think-tank, improving from -53.8 in December.
The euro rose against the dollar after two days of losses as risk appetite improved on the better-than-expected German sentiment survey and Chinese economic growth data.
Brent front-month March crude edged up 5 cents at $111.39 a barrel at 12:20 p.m. EST, swinging from $110.56 to $112.76, above its 200-day moving average of $112.45.
U.S. February crude rose $1.98 to $110.68 a barrel, having traded from $98.60 to $101.01 and with February crude options expiration adding to the choppy price trajectory.
The U.S. stock market also rose on improved sentiment about China's growth prospects that countered concerns about Europe in the wake of last week's credit downgrades. .N
Also supportive was a report showing the New York Fed's Empire State manufacturing index rose to 13.48 in January, beating economists' expectations.
Credit ratings agency Standard & Poor's downgraded the credit ratings of nine euro-zone countries on Friday, stripping France and Austria of their triple-A status.
Iraq intends to boost crude oil exports by up to 400,000 barrels per day over the next two months, an Iraq industry source told Reuters, adding another factor to limit oil's price gains on Tuesday.
Additional reporting by Gene Ramos in New York, Claire Milhench in London and Manash Goswami in Singapore