UPDATE 1-Brent rises above $109 on China data; Iran comments weigh
* Iran, U.S. signal will to engage as new President Rouhani takes oath
* U.S. hiring slows in July but jobless rate falls to 4-yr low
* Renewed protests keep Libya oil exports below half of normal
* Coming Up: U.S. ISM Non-manufacturing PMI; 1400 GMT
(Recasts, adds comments, updates prices)
SINGAPORE, Aug 5 (Reuters) - Brent oil rose above $109 a barrel on Monday after promising China data, but prices may struggle to hold on to gains as risk premiums come off after Iran and the United States signalled a fresh will to end the dispute over Tehran's nuclear programme.
China's services sector expanded as new business orders recovered from a multi-year low in a rare sign of resilience. Investors are viewing the latest numbers as setting the trend for other key data due from the world's No.2 oil consumer this week.
Brent crude gained 29 cents to $109.24 a barrel by 0523 GMT, recovering from a drop to as low as $108.30 earlier in the session. U.S. oil rose 24 cents to $107.18, after slipping to $106.01.
"Brent prices are reacting to macroeconomic headline data," said Natalie Rampono, an analyst at ANZ said. "The market may be seeing the latest PMI numbers as indicating that underlying demand could be picking up in China. But we at ANZ continue to remain cautious because the data out of China is mixed."
Crude also drew support from worries over supply from key exporters such as Libya and Iraq and smaller supplier Yemen.
Libya's oil exports were flowing at less than half of normal rates on Friday as strikes and protests kept major terminals shut in one of the worst disruptions to hit the North African OPEC producer in the past year.
Shipments from Iraq may be cut by between 400,000 and 500,000 barrels per day in September. Tribesmen blew up Yemen's main oil export pipeline late on Saturday, halting the flow of crude.
But receding worries about supply after comments from Iran and the United States kept a lid on oil prices.
Newly elected Iranian President Hassan Rouhani has called for dialogue to reduce "antagonism and aggression", while the United States has said it was ready to work with Rouhani's government if it were serious about engagement.
Iran's oil exports have been slashed by more than half due to Western sanctions aimed at forcing Tehran to quit its nuclear programme. As a result, oil has stayed above $100 for most of 2012 and this year although a weak global economy has reduced demand growth.
"Given the change of tone in Iran and comments from the United States, we are seeing risk premiums surrounding the Middle East and Iran coming off," said Jonathan Barratt, chief executive of Sydney-based commodity research firm Barratt's Bulletin.
A weak jobs report from the United States, the world's top economy and oil consumer, also capped oil prices.
"We are also seeing some adjustments in prices after Friday's jobs report," Barratt said.
He expects U.S. oil to trade between $108.50 and $102.50 over the next few days, with Brent commanding a $2 premium.
(Editing by Himani Sarkar)