* U.S. President Obama approves limited air strikes on Iraq
* U.S. air strikes may threaten Iraqi oil supplies
* Brent hits $106.85 a barrel before dropping back
* Chinese exports jump 14.5 percent in July
(Adds analyst quote, updates prices)
SINGAPORE, Aug 8 (Reuters) - Oil prices on both sides of the Atlantic rose more than $1 on Friday, with Brent approaching $107 a barrel after the United States approved air strikes against Islamic militants in Iraq.
President Barack Obama said he had authorized limited use of American air power on advancing Islamic militants in northern Iraq to protect American personnel, but had no intention of getting dragged into war there.
Air strikes would significantly raise the threat of oil output disruptions in the second-largest OPEC producer.
Prices were also supported by data showing China's exports jumped 14.5 percent in July, another sign that government economic incentives are having a positive impact on the world's No.2 oil consumer.
"The market will look very close at what happens next, and whether oil supplies from southern Iraq could be under threat," Tetsu Emori, a commodity fund manager at Astmax Co Ltd in Tokyo.
"Speculators may use this as an opportunity to enter the market, after the big correction we saw over recent weeks. But it seems the market is still oversupplied, and that should keep a cap on prices," said Emori.
Brent crude for September delivery rose $1.18 to $106.62 a barrel by 0646 GMT, after trading as high as $106.85 a barrel earlier in the session. The contract was on track for gains of more than 1 percent for the week.
U.S. crude rose 87 cents to $98.21 a barrel, after trading as high as $98.45 a barrel.
Brent's premium to U.S. crude <CL-LCO1=R> hit $8.57 a barrel on Friday, the highest in more than six weeks.
Islamist militants surged across northern Iraq toward the capital of the Kurdish region on Thursday, sending tens of thousands of Christians fleeing for their lives.
Any air strikes would be the first carried out by the U.S. military in Iraq since the withdrawal of its forces at the end of 2011, but Obama insisted he would not commit any ground forces and had no intention of letting the United States get dragged back into a war there.
"Gains may extend further when London opens, but after a round of short covering, I think we will see some profit taking in the market," said Ken Hasegawa, a commodity sales manager at Newedge Japan.
"The market is very thin, so such sudden news can result in significant price moves, not only in oil but also in stock and currency markets," said Hasegawa.
Brent spiked above $115 in mid-June on fears that violence in Iraq would disrupt oil supplies from the OPEC member.
But prices fell back more than $10 over the past six weeks as it became clear that Iraqi oil continued to flow steadily from southern fields, and as investors shifted attention to what appeared to be an oversupplied global oil market.
CHINESE EXPORTS JUMP
China's export growth in July leapt 14.5 percent from a year earlier, nearly double that of an expected increase, while imports posted a surprising fall of 1.6 percent, the Customs Administration of Customs said on Friday.
China's exports have been sluggish for much of this year but recently began showing signs of life thanks to firmer global demand and government incentives.
However, the country's crude oil imports fell 9 percent in July from a year ago to 23.76 million tonnes, hitting the lowest daily level since March, the data showed.
On Hawaii, two refineries were preparing for a pair of hurricanes approaching the archipelago, possibly delaying shipments of crude oil to the state.
Par Petroleum Corp and Chevron Corp each were securing their plants on the island of Oahu, spokesmen for the respective companies said.
(Reporting By Jacob Gronholt-Pedersen; Editing by Tom Hogue and Richard Pullin)