London:

Brent oil held steady above $112 per barrel on Tuesday as upbeat manufacturing data in China pointed to demand growth while conflicts in Iraq and Ukraine continued to underpin supply concerns.

China’s factory growth rose to a six-month high, adding to signs the economy of the world’s second-biggest oil consumer is regaining strength.

“The latest data from China suggests that the main economic and oil demand growth engine of the world may be starting to turn the corner toward the upside,” said Dominick Chirichella of the Energy Management Institute in New York.

Brent crude gained 2 cents to $112.38 a barrel by 10:24am. EDT (1424 GMT). U.S. oil gained 39 cents to $105.76 a barrel.

Oil markets have for weeks been rattled by supply concerns due to the Ukraine crisis, while a takeover of large areas of Iraq by Sunni militants has stoked fears of disruption in exports from OPEC’s second-biggest producer.

“Supply-related headlines and agitation (in Iraq and Ukraine) will keep the speculators on the long side of the market,” said Thomas Saal, an analyst at INTO Hencorp Futures, LLC in Miami. Geopolitical tension coupled with the economic data from China are likely to push Brent back above $113, he said.

Iraq’s new parliament convened on Tuesday under pressure to name a unity government to prevent the country splitting apart after an onslaught by Sunni militants who have declared a “caliphate” to rule over all the world’s Muslims.

Meanwhile, in Ukraine, Kiev renewed military operations against pro-Russian separatists in the east, as Russian President Vladimir Putin vowed to protect interests of ethnic Russians abroad.

U.S. STOCKS DRAW The U.S. oil benchmark drew support from forecasts that crude inventories fell last week. A preliminary Reuters poll estimated a decline of 2.3 million barrels.

The survey took place ahead of weekly inventory reports from industry group the American Petroleum Institute and the U.S.

Energy Information Administration.

A slide in OPEC’s output also supported prices. The producer group’s output fell in June from May’s three-month high, a Reuters survey found, as fighting in Iraq closed the country’s largest refinery and technical problems slowed its southern exports.

A Reuters monthly poll of 26 analysts forecast Brent crude oil would average $108.00 a barrel in 2014, the highest average forecast of a Reuters poll so far this year and well above the $105.90 average projected in last month’s poll.