Brent crude futures rose above $104 on Friday on worries about supply disruption after the US Congress approved a bill imposing sanctions on 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 their respective parliaments to agree to austerity measures.

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 62 cents to $104.22 a barrel by 0331 GMT, ending two days of fall. US crude rose 28 cents to $94.15 a barrel, after falling $1.08 to settle at $93.87.

'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.

'China can run but can't hide from what's going on in Europe. The fallout will hurt everybody.'

Brent is set to decline 4 per cent this week, its biggest drop since the week ended Nov. 20, while the US benchmark is set to slip 5.4 per cent, its biggest fall since the week ended Sept. 25.

Oil markets took wide swings this week, jumping more than 2 per cent on Tuesday on jitters over Iran supplies and threats to key shipping lanes, pushing Brent to a high of $111.10.
Prices plunged more than 4 per cent the next day in a broad commodities selloff triggered by concerns over Europe.

The twin factors of slowing economic growth and worries over constriction of supplies due to simmering tension in the Middle East will keep the US crude benchmark at around $95 a barrel and Brent at around $105, Le Brun said.

The dollar index slipped 0.12 per cent after rising for most of the week as the euro slumped and sliding to an 11-month low. A decline in the greenback typically boosts commodities like oil priced in the dollar.

'The dollar has been rising because investors are getting out of risky assets due to the uncertainty surrounding the European Union,' Le Brun said.

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

Plans for fresh US 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.

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.-Reuters