UPDATE 2-Brent slips below $118, heads for 1st weekly loss in five

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* Iran-UN failed talks revive supply concerns

* Coming up: US Industrial output at 1415 GMT (Updates prices)

By Ramya Venugopal

SINGAPORE, Feb 15 (Reuters) - Brent crude eased below $118 per barrel on Friday and was heading for its first weekly loss in five after disappointing euro zone data revived concerns about the troubled region.

The euro zone last quarter slipped deeper into recession, with the steepest quarter-on-quarter drop since 2009. The bloc's biggest economies, Germany and France, fared worse than expected, suggesting problems there are far from over.

The euro zone data follows disappointing numbers from Japan on Thursday which showed that the country is still struggling to emerge from recession, while the U.S. fiscal concerns have also not been laid to rest.

"I think the reality is setting in that there are a lot of roadlocks still ahead; it doesn't surprise me that Brent has slipped," said Tony Nunan, an oil risk manager with Mitsubishi Corp in Tokyo. "But prices will still stay supported because of the geo-political risk."

Renewed worries over Iran's nuclear programme as well as other Middle East tensions have kept a floor under the prices.

Front-month Brent futures fell 28 cents to $117.72 per barrel at 0810 GMT. The benchmark is heading for its first weekly loss since the first half of January.

U.S.

"The bloc's biggest economies, Germany and France, fared worse than expected, suggesting problems there are far from over.The euro zone data follows disappointing numbers from Japan on Thursday which showed that the country is still struggling to emerge from recession, while the U.S"crude shed 22 cents to $97.10 per barrel, but still notched gains of more than 1 percent this week on concerns about gasoline supply.

EUROPE, IRAN WORRIES

The euro zone's 0.6 percent drop in economic output in the final quarter of last year dampened the glimmer of hope offered by positive industrial output data on Wednesday. Analysts had expected the output to drop 0.4 percent.

It marked the currency bloc's first full year since 1995 in which no quarter produced growth. For the year as a whole, gross domestic product (GDP) fell by 0.5 percent.

"The size of the Eurozone GDP contraction in the December quarter has provided a moment of sombre reflection to what has been a festive-like atmosphere in financial markets," said Tim Waterer senior trader at CMC Markets in Sydney.

Supporting prices, U.S. jobless claims fell more than expected, pointing to a steady improvement in job conditions in the world's biggest oil consumer.

Initial claims for state unemployment benefits dropped 27,000 to a seasonally adjusted 341,000, lower than the 360,000 forecast in a Reuters poll.

Increasing geo-political tensions added to the support.

Talks between Iran and the United Nations appear to have failed, as its inspectors returned on Thursday from talks in Tehran with no deal on reviving a nuclear investigation, no date for a new meeting and no signal of hope for big power diplomacy aimed at averting a war.

Worries about Iran's conflict with the West curbing its oil supply had eased slightly after the Middle Eastern nation appeared to be taking steps to slow the growth of its stockpiles of nuclear materials that could be used to make a bomb.

Syria's civil unrest continues to worsen, as does sabre rattling by Israel, adding to concerns about disruption of Middle Eastern supplies.

U.S. prices also found support from concerns that gasoline supplies may be reduced by refinery maintenance shutdowns, which pushed prices of the product as well as the oil complex higher.

(Editing by Tom Hogue, Ed Davies and Muralikumar Anantharaman)

United Nations Energy