Brent crude rose above $111 on Friday on hopes of steady demand growth as the latest data out of the US swelled a list of positive indicators pointing to economic expansion gaining momentum in the world's top oil consumer.

The indicators come just as the US Federal Reserve promised to keep interest rates low well into 2014. Crude also got additional support as supply threats escalated after Iran said it might stop exports to the European Union, helping oil buck a pause in broader markets a day after they rallied on the Fed's market outlook.

Brent crude rose 30 cents to $111.09 a barrel by 0234 GMT, and is poised to post a weekly gain of 1.4 per cent, reversing two weeks of losses. US crude increased 27 cents to $99.97, and is set to rise 1.5 per cent this week, also reversing two weeks of losses.

"The Fed's lower interest rate stance is still getting priced in. The statement caught markets by surprise as it so explicitly stated the interest rate outlook," said Natalie Robertson, an analyst at ANZ.

"For oil there is the supply disruption issue, but it is very hard to assess what the exact impact will be, as we have other producers, such as Iraq and Libya, boosting output.”

New orders for US manufactured goods rose in December and a gauge of future business investment rebounded. The Commerce Department said orders for durable goods climbed 3.0 per cent last month. Economists had forecast orders rising 2.0 per cent.

Yet a separate report showed new single-family home sales unexpectedly fell in December for the first time in four months, while the median home price also dropped.

The housing market remains constrained by high unemployment, falling prices and an oversupply of unsold homes following a bust that triggered the 2007-09 recession. Despite the decline in sales, there were a record low 157,000 new homes on the market last month.

"The manufacturing side of things is improving, but we think it has to broaden out to the housing market for the country's growth outlook to be sustained," Robertson said.

Demand outlook

Oil investors also remain worried about Greece's ongoing debt crisis and how it may affect the global economy if policymakers aren't able to resolve it soon.

Greece and its private creditors made progress on Thursday in talks on restructuring its debt, both sides said, and they will continue negotiating on Friday with the aim of sealing an agreement within a few days.

Iranian President Mahmoud Ahmadinejad said the European Union rather than his country will lose under new EU sanctions banning the import of Iranian oil by July 1. His remarks, part of a speech broadcast on state radio, came as Iranian lawmakers said they might cut supplies to the EU ahead of the July deadline.

Brent is expected to revisit $108.91, as the rise from this Wednesday's low seems to be a rebound, while US oil has been stuck in a range of $97.45 to $101.39 per barrel, with a good chance of falling to $97.45, Reuters technical analyst Wang Tao says. – Reuters