* U.S. Congress passes bill to avert 'fiscal cliff'
* China manufacturing data points to better economic growth
* Euro zone factory downturn deepens, limits oil demand
NEW YORK, Jan 2 (Reuters) - Oil prices rose to near 11-week
highs on Wednesday as part of a cross-market rally after the
U.S. Congress approved a deal to avert tax hikes and spending
cuts that threatened economic growth.
U.S. lawmakers on Tuesday approved a deal to prevent huge
mandated tax increases and spending cuts that investors worried
would have pushed the largest oil consumer into recession.
Months of uncertainty and political brinkmanship had rattled
consumers, businesses and financial markets. Concerns a deal to
avoid the "fiscal cliff" would not be reached was the latest
economic threat to weigh on oil markets, which were pressured
throughout last year by the euro zone crisis and tepid fuel
The agreement prompted a broad global market rally, boosting
investor appetite for riskier assets and pressuring the dollar
and safe-haven government bonds.
International benchmark Brent crude traded up to $112.90 a
barrel -- highs not seen since Oct. 19 -- before paring gains as
traders assessed possible new headwinds for the U.S. economy.
"There was the fiscal cliff euphoria, but the markets are a
little overdone and people realize you still have the debt
ceiling battle, social security taxes going up and dealing with
spending sequestration and budget cuts," said Mark Waggoner,
president at Excel Futures Inc.
Brent February crude traded up $1.26 to $112.37 a
barrel at 1:51 p.m. EST (1851 GMT), off the earlier highs but
above the 100-day moving average of $111.28.
U.S. February crude gained $1.14 to trade at $92.96 a
barrel, pushing above the 200-day moving average of $91.90 but
off earlier highs of $93.87.
Trading volumes showed signs of rebounding after dropping
off during the late December holiday period, with Brent volumes
slightly above the 30-day moving average, while U.S. crude
volumes were down 11 percent below that level.
Further support for oil came from positive economic data
from the United States and China, the two largest consuming
nations. U.S. manufacturing ended 2012 on an upswing, with
factories returning to growth in December after contracting the
previous month, the Institute for Supply Management said.
China's official manufacturing purchasing managers' index
held steady in December at 50.6, adding to evidence its economy
picked up in the fourth quarter of 2012 after gross domestic
product growth slowed for seven straight quarters.
Traders were watching tensions in the Middle East for signs
of threats to production in the vital area. Iran is carrying out
naval drills in the Strait of Hormuz, the shipping route through
which 40 percent of the world's sea-borne oil exports pass.
Iran has threatened to block Hormuz if the country comes
under military attack over its disputed nuclear program. The
United States has said it would not tolerate any obstruction of
commercial traffic through the strait.
The civil conflict in Syria, sectarian strife in OPEC-member
Iraq and the ongoing tensions between Israel and its neighbors
should remain potential flashpoints in the energy-rich region.
(Reporting by Robert Gibbons and Matthew Robinson in New York,
Christopher Johnson in London and Florence Tan in Singapore;
Editing by Jeffrey Benkoe and Kenneth Barry)