UPDATE 1-Brent rises above $109 on demand revival hopes, supply concerns

* Jobless claims data shows labour market recovery gaining traction

* U.S. senators introduce bill to approve Keystone XL pipeline

* Obama says Iran more than a year away from nuclear weapon

* Coming Up: U.S. industrial output; 1315 GMT

(Adds comments, updates prices)

SINGAPORE, March 15 (Reuters) - Brent futures rose above $109 a barrel on Friday as strong U.S. jobs data fuelled hopes of a better outlook for demand in the world's top oil consumer, while simmering concerns over supply from the Middle East added support.

Investors took on more risk as the jobs data added to a string of positive numbers suggesting a steady recovery in the world's largest economy, pushing up Asian shares and base metals.

Oil got a further boost after President Barack Obama said military force remained an option if sanctions and diplomacy failed to thwart Iran's nuclear ambitions.

Brent crude rose 50 cents to $109.46 a barrel by 0556 GMT, gaining for a second day after snapping four straight days of losses. The April contract, which expired on Thursday, settled 90 cents higher, but the benchmark is poised for its fourth weekly decline in five weeks.

U.S. oil gained 21 cents to $93.24 a barrel, and is set to post its second straight week of gains.

"The numbers we are seeing in the United States are a result of the cheap money that has been available," said Jonathan Barratt, chief executive of Sydney-based commodity research firm Barratt's Bulletin.

"On the fundamental side, Iran is an issue. When Obama says Iran is more than a year away from a nuclear weapon, it means one year too close."

Iran was still more than year away from developing a nuclear weapon Obama said in an interview with Israeli television broadcast on Thursday, just six days before his visit to Israel.

Obama appeared to send a message to Prime Minister Benjamin Netanyahu of the need for patience with Washington's Iran strategy while also showing U.S. resolve to confront Tehran if necessary.

Worries the standoff between the West and Iran over the Islamic Republic's controversial nuclear programme will escalate and disrupt oil supplies have kept Brent above $100 a barrel through most of 2012 and this year despite weak demand.

The number of Americans filing new claims for unemployment benefits dropped for a third straight week last week, the latest indication the labor market recovery was gaining traction.

That pushed the Dow Jones industrial average to extend its winning streak to 10 days on Thursday, a string of gains last seen in late 1996, to end at another record high. The S&P 500 took a late-day run at its record closing high of 1,565.15, but ended just 2 points away.

"It was a supportive environment for a rally in crude oil prices amid better-than-expected US jobless claims data, an S&P500 index that is a whisker away from a record (nominal) high, and an easing dollar," analysts at ANZ said in a report.

PRICE SPREAD

Beyond fundamental factors of demand growth and supply concerns, U.S. oil is gaining faster than Brent because investors are unwinding positions on the spread of the two contracts <CL-LCO1=R>.

The difference has narrowed nearly $8 a barrel after touching $23.45 on Feb. 8, the widest since end-November.

The U.S. benchmark is gaining faster as work progresses on a key pipeline that will help ease an oil glut in the United States from a drilling boom.

A bipartisan bill introduced in the U.S. Senate on Thursday would give Congress the power to approve TransCanada Corp's Keystone XL pipeline project to link Canada's oil sands with refineries and ports in Texas.

The U.S. contract has gained nearly 5 percent from the low of $89.33 a barrel for the year touched on March 4, which was its weakest since end-December. It opened at about $92 for the year and rose to a high of more than $98 on Jan. 30.

The European benchmark, in contrast, is just about $2 away from the low of $107.91 for the year hit on March 13, which was its weakest since mid-December.

"There is a realignment happening because of the pipeline and how that is helping ease the glut of oil in the United States," Barratt said.

(Reporting by Manash Goswami; Editing by Clarence Fernandez)