UPDATE 3-Oil steadies above $116 on economic outlook, Mideast

* Middle East tensions fuel supply worries

* Coming Up: U.S. durable goods, factory orders at 1500 GMT (Updates throughout, changes dateline, previous SINGAPORE)

LONDON, Feb 4 (Reuters) - Brent crude oil consolidated above $116 per barrel on Monday, not far off 4-1/2 month highs, on signs of improving economic growth in the United States and China and concern over geopolitical tension in the Middle East.

Positive U.S. jobs data and confirmation of a mild recovery in China supported by purchasing manager surveys have allayed concern over weak demand from the world's two biggest oil users.

Stock markets have been buoyant with Asian shares climbing to 18-month highs on Monday, and the euro has also been strong after manufacturing figures suggested the European bloc had passed the worst point in its recession.

Brent traded 35 cents lower at $116.41 per barrel at 0900 GMT, close to a 4-1/2 month high of $117.07 reached on Friday. Brent has risen for three straight weeks.

U.S. crude slipped 45 cents to $97.32 per barrel, after rising for eight consecutive weeks, the longest such winning streak since July-August 2004.

"The market is long due a correction. Still, there is no point standing in front of a moving train," VTB Capital oil strategist Andrey Kryuchenkov said.

Analysts at U.S. brokerage Jefferies Bache agreed:

"We are maintaining a bullish trading stance," they wrote in a note to clients. "We will strongly caution against any attempts to pick a top to this strong price advance that is approaching two months in duration."

ECONOMICS VS GEO-POLITICS

The global economic outlook brightened considerably last week after U.S. payrolls rose by 157,000 last month, while the Institute for Supply Management said its index of national factory activity rose to its highest since April.

Other purchasing manager surveys showed that China's factories remained on track for a mild recovery, while the euro zone manufacturing sector, despite a contraction, had its best month in a year, suggesting the worst may be over.

Data on Sunday showed China's increasingly important services sector grew for the fourth-straight month in January, although the expansion was modest.

Also underpinning oil prices were supply concerns stemming from rising tensions in the Middle East, the world's biggest source of crude.

A suicide bomber detonated a truck packed with explosives in the Iraqi city of Kirkuk on Sunday, killing at least 33 people. The blast was the third major attack in weeks in or near the city of Arabs, Kurds and Turkmen, at the heart of a dispute between Iraq's central government and the autonomous Kurdistan region.

Iran, facing stiff sanctions from the United States and Europe over its nuclear programme, said on Sunday it was open to a U.S. offer of direct talks to try to resolve the dispute.

It said six world powers had suggested a new round of nuclear negotiations this month, but did not commit itself to either proposal.

In Beirut, President Bashar al-Assad accused Israel on Sunday of trying to destabilise Syria by attacking a military research base outside Damascus last week, and said Syria was able to confront "current threats ...and aggression" against it.

Elsewhere, Yemen confirmed that a ship intercepted last month off its coast was an Iranian vessel trying to smuggle explosives and surface-to-air missiles to the country, the state news agency Saba reported. (Additional reporting by Ramya Venugopal in Singapore; editing by Jason Neely)