UPDATE 5-Oil stalls at $111, heads for weekly gain
* U.N. nuclear inspectors says talks with Iran have failed
* China's economy rebounds in Q4; signals hope for 2013
* Global supply tighter on China growth, Saudi cuts - IEA
* Coming Up: U.S. Reuters/UMich consumer sentiment; 1455 GMT
(Updates prices, hostage situation)
LONDON, Jan 18 (Reuters) - Oil prices stalled at $111 a barrel on Friday, retaining most of Thursday's gain, supported by stronger economic growth in China and supply concerns after U.N. talks with Iran failed and as Algeria's hostage crisis continued.
Brent crude briefly edged higher after the United Nations said nuclear inspectors had failed to reach a deal with Iran to unblock an investigation into suspected bomb research after two days of intensive discussions.
It was the latest setback in diplomatic efforts to allay international concerns over Tehran's atomic ambitions and avert the threat of a war.
"There is always a probability of an agreement and even though it is small, the impact of an agreement will be high," said Thorbjoern Bak Jensen, an analyst at A/S Global Risk Management.
Front-month Brent was down 12 cents at $110.98 barrel at 1546 GMT, retaining the bulk of Thursday's $1.42 a barrel gain.
U.S. oil was down 19 cents at $95.30 a barrel, also holding on to most of the previous session's $1.25 gain.
Brent is headed for its third weekly gain in four, while U.S. crude is poised for its sixth weekly gain.
The West's main energy agency said upward pressure on prices could continue as rising Chinese demand and falling OPEC supplies tighten world markets and drain inventories.
"All of a sudden, the market looks tighter than we thought," the International Energy Agency (IEA) said. "OECD inventories are getting tighter - a clean break from the protracted and often counter-seasonal builds that had been a hallmark of 2012."
More immediate supply concerns from the hostage crisis in Algeria also supported prices as the fate of those held by Islamic militants, who seized a gas facility, remained unclear.
About 60 foreigners were still being held hostage or missing inside the plant on Friday after Algerian forces stormed the desert complex to free hundreds of captives taken by Islamist militants, who threatened to attack other energy installations.
Following the attack, Libya's oil protection force said it was beefing up security around its oil and gas installations in the western and southern areas bordering Algeria.
Chinese fourth-quarter economic growth was a little stronger than expected at 7.9 percent versus analysts' forecasts of 7.8 percent.
Analysts said the end-of-year spurt, driven by infrastructure spending and a jump in trade, could signal a stable growth path.
"The China data was largely in line with expectations and that's reflected in the oil markets. At the moment, it's steady as it goes," said Ric Spooner, chief market analyst at CMC Markets in Sydney.
"The broad demand outlook is for moderate growth, so markets should be generally preparing to improve, although for Brent the upside may be limited by adequate supply."
China's fuel consumption in 2012 experienced the slowest growth since 2008 but beat forecasts by the IEA, and demand growth is expected to accelerate this year as its economy recovers.
Implied oil demand in 2012 in the world's second-largest fuel consumer rose 4.5 percent, or 420,000 bpd on the year, according to Reuters calculations based on preliminary government data, beating the IEA forecast for growth of 3.3 percent, or 301,000 bpd.
China's numbers added to optimistic sentiment after a sharp drop in U.S. unemployment claims and a surge in residential construction helped boost investor confidence on Thursday.
Asian and European shares all rose on Friday, while the dollar index was up by 0.25 percent.
(Additional reporting by Manash Goswami and Ramya Venugopal; editing by William Hardy and Jane Baird)