Brent rises above $104 on supply concerns; econ woes weigh

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SINGAPORE (Reuters) - Brent crude futures rose above $104 on Friday on worries about supply disruption after the U.S. Congress approved a bill imposing sanctions against Iran's central bank, limiting buyers' ability to pay for oil they buy from the Islamic Republic.

Yet gains were capped on fears Europe's debt crisis would worsen as the region's leaders struggle to get austerity measures past their respective parliaments. Investors are worried further delays may engulf the world's growth engines, with signs already emerging of China feeling the heat.

Brent crude, which rolled over to February as the prompt month, rose 42 cents to $104.02 a barrel by 0210 GMT, after slipping 65 cents to settle at $103.60 a barrel. U.S. crude rose 6 cents to $93.93 a barrel, after falling $1.08 to settle at $93.87, after reaching a $95.99 session high.

"The geopolitical tensions surrounding Iran are putting a floor, keeping prices supported at current levels despite growing worries about the economy," said Ben Le Brun, market analyst at OptionsXpress.

"Congress approved a bill imposing sanctions against Iran's central bank, limiting buyers' ability to pay for oil they buy from the Islamic Republic.Yet gains were capped on fears Europe's debt crisis would worsen as the region's leaders struggle to get austerity measures past their respective parliaments""China can run but can't hide from what's going on in Europe. The fallout will hurt everybody."

The twin factors will keep the U.S. crude benchmark at around $95 a barrel and Brent at around $105, Le Brun said.

The U.S. Congress on Thursday approved a defense bill that, among other things, imposes sanctions on Iran's central bank, sending it to President Barack Obama for his expected signature into law.

Plans for fresh U.S. sanctions to isolate Tehran have sent shudders among Asian governments who fear they will have no way to pay for Iranian crude imports and face rising costs to fuel the region's growing economies.

Japan is in talks with U.S.

diplomats about a possible waiver to U.S. legislation that would make it more difficult to pay Iran. South Korea would also seek an exemption if the bill is signed into law.

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Graphic on Iran's oil customers: link.reuters.com/dab65s

Sanctions imposed on Iran: link.reuters.com/had45s

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Along with the U.S., EU leaders called on Friday for more sanctions against Iran by the end of January, in an effort to increase pressure on Tehran over its disputed nuclear program.

While these measures threaten to choke off supplies from the world's fifth-largest oil exporter, investors are also worried about global economic growth worsening.

Italy's government faces a confidence vote in parliament on Friday, a move to speed up approval of a 33-billion euro ($43 billion) austerity package intended to restore market confidence in the euro zone's third largest economy.

Reflecting the worsening financial conditions, Fitch Ratings, the third-biggest of the major credit rating agencies, on Thursday downgraded Goldman Sachs, Deutsche Bank and five other large banks based in Europe and the United States, citing "increased challenges" in the financial markets.

(Reporting by Manash Goswami)