* Euro zone economy on course for worst quarter since early 2009
* Brent on track for second weekly gain in three weeks
* Israel begins withdrawing army on Thursday
* Focus to return on U.S. fiscal cliff after holiday
By Jessica Jaganathan
SINGAPORE, Nov 23 (Reuters) - Brent crude slipped towards $110 a barrel as weak data from Europe raised concerns about global demand and a ceasefire in the Gaza Strip eased supply concerns, overshadowing positive manufacturing data out of China.
The outlook for Europe was bleak with business surveys showing on Thursday the euro zone economy was on course for the worst quarter since early 2009, potentially reducing oil demand.
Brent crude slipped 27 cents to $110.28 a barrel by 0251 GMT, on track for its second weekly gain in three weeks. U.S. crude fell 36 cents against Wednesday’s settlement to $87.02 and was on track for its third consecutive weekly gain.
The U.S. market, which was closed on Thursday for the Thanksgiving holiday, will not issue a formal settlement until Friday.
“I think what we’re seeing in oil markets at the moment is a re-pricing after the ceasefire in the Gaza Strip,” said Ben Le Brun, a market analyst at OptionsXpress.
“Traders are obviously having one eye on the U.S. fiscal cliff and on Europe with the Greek and Spanish bailouts having a few question marks...but I‘m still a bit surprised we haven’t seen as much support in the oil markets as we would have historically expected.”
Supply concerns for oil eased after Israel began withdrawing the army on Thursday that had been poised to invade the Gaza Strip to go after Hamas, with both sides declaring they had won their eight-day battle.
“Concerns over potential supply disruptions have eased after a ceasefire took effect in Gaza - but markets will certainly keep an eye on headlines from the region with some market participants describing the truce as ‘shaky’,” analysts from ANZ bank wrote in a note on Friday.
Despite positive manufacturing data this week out of the United States and China, the world’s top oil consumers, investors are concerned the European economy could keep oil demand concerns elevated.
Europe looks set to remain the major drag on the world economy next year as it re-entered recession in the third quarter, and this quarter seems unlikely to bring any respite.
While factory data in the euro zone surpassed expectations, there was a worrying decline in its services sector, comprising the banks, hotels and restaurants that make up most of its economy.
PMI compiler Markit said the surveys were consistent with the euro zone economy shrinking 0.5 percent this quarter, which would be the worst reading since the first quarter of 2009, when the economy hit its lowest ebb during the financial crisis.
Also affecting investor sentiment were the dimming prospects of a deal on the European Union’s long-term budget on Friday after a fresh compromise proposal offered concessions to France and Poland but ignored British and German demands for deeper overall spending cuts.
Next week, investors’ focus will likely return to talks on the U.S. “fiscal cliff” - $600 billion worth of tax increases and spending cuts set to begin in 2013 unless agreement is reached on the budget deficit.
Investors fear the measures could derail the U.S. economic recovery, and in turn oil demand.
“Conventional wisdom says if both sides of parliament can come to an agreement and the U.S. doesn’t fail over the fiscal cliff then that should be supportive oil prices,” said Le Brun. (Editing by Miral Fahmy)