February 1, 2012 / 6:06 AM / 6 years ago

UPDATE 7-Oil rises to $112 on China data, Iran tension

* U.S. crude stocks rise more than expected-EIA

* U.S. lawmakers to vote on more sanctions on Iran

* China manufacturing improves slightly in January (Adds U.S. inventory report, updates prices)

By Simon Falush and Alex Lawler

LONDON, Feb 1 (Reuters) - Oil rose above $112 a barrel on Wednesday as firm Chinese economic data and tension between Iran and the West lent support, although a larger-than-expected rise in U.S. crude stocks limited gains.

U.S. crude oil inventories rose by a more-than-forecast 4.18 million barrels last week, according to the Energy Information Administration report released at 1530 GMT. Gasoline stocks also posted a larger-than-expected increase.

Brent crude was up $1.31 at $112.29 by 1626 GMT, down from an intra-day high of $112.82. U.S. crude was up 13 cents at $98.61.

"Overall inventories are back on the rise, which should be bearish," said Kyle Cooper, managing director of research at IAF Advisors in Houston.

The market was supported earlier in the session by positive data on the Chinese economy.

China's official Purchasing Managers' Index showed the manufacturing sector in the world's largest energy consumer expanded modestly in January, with the index reading inching up to 50.5 from 50.3 in December.

Concern about Iranian oil supplies is also supporting prices. The European Union has raised pressure on Iran over its nuclear programme by banning Iranian oil from July 1. Tehran has said it may cut off supplies to some unspecified countries.

In the United States, where a tough new set of banking sanctions became law on Dec. 31, lawmakers are considering adding measures that would single out Iran's national oil and shipping companies and restrict its ability to tap into electronic banking services.

Below-average temperatures in Europe have put upward pressure on oil products such as heating oil, which has fed into stronger crude prices.

Still, worries about the euro zone debt crisis continue to weigh on investor sentiment.

Euro zone manufacturing activity declined for a sixth month in January as a slight upturn in Germany failed to offset a prolonged contraction in the bloc's smaller economies, a survey showed on Wednesday.

The EIA oil supply report contrasted with that of the industry funded American Petroleum Institute, which said on Tuesday crude oil inventories rose by 2.1 million barrels last week. (Additional reporting by Florence Tan in Singapore and Robert Gibbons in New York; editing by William Hardy and Keiron Henderson)

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