SINGAPORE: Brent crude held steady above $122 a barrel on Friday after China's economic growth beat forecasts despite government efforts to cool expansion and put the brakes on inflation.
Strong growth in the world's second-largest oil consumer is bullish for fuel demand, but may stoke concern that Beijing will tighten monetary policy again in moves that could slow consumption.
Prices were also supported by nagging worries that more supply in the Middle East and Africa could be at risk as fighting in Libya continued.
ICE Brent crude for June was up 10 cents at $122.10 a barrel by 0503 GMT after gaining as much as 57 cents earlier.
US crude futures for May rose for a third day to $108.27 a barrel, up 16 cents.
"With CPI above the government's desired levels, domestic fuel prices will stay in check, indirectly subsidising consumption growth, which bodes well for higher oil prices ahead," said Gordon Kwan, head of energy research at Mirae Assets Securities in Hong Kong.
Analysts expect China to raise reserves at banks and hike interest rates to put a lid on consumer prices after the country's turbo-charged growth eased just a touch in the first quarter, while its inflation jumped to a 32-month high.
Dongming Xie, economist at OCBC Bank in Singapore, said the data suggests there is still room for China to tighten further.
"We think China is likely to front load the tightening policy this quarter, riding on the still strong growth momentum," he said. "We expect one interest rate hike in June and one more reserve requirement ratio hike in April or May."
Expectations of a global economic recovery, a weak dollar and fears of supply disruption in the Middle East and Africa supported oil prices.
Surging inflation pressures and the natural disasters that ravaged Japan last month looks unlikely to stall an ascendant global economy, a Reuters poll of around 350 economists showed.
The dollar index, which tracks the greenback's performance against a basket of major currencies, rose slightly in Asia on Friday after falling to a 16-month low.
Britain, France and the United States vowed on Friday to keep up their military campaign in Libya until Muammar Gaddafi gives up power, while the defiant leader pounded the city of Misrata with missiles.
"It is important to remember that it is not demand, but supply pressures, that are driving oil pricing," J.P. Morgan analysts led by Lawrence Eagles said in a note.
"We do not yet feel that the underlying tensions that risk a further run-up in prices have gone away."
Yemen's opposition rejected on Thursday an offer to join Gulf-mediated talks on a transfer of power in the Arabian Peninsula state, and set a two-week deadline for President Ali Abdullah Saleh to step down.
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