* Hopes for U.S. debt reduction plan supports prices
* Weak economic data from China weighs on sentiment
* Coming up: US CFTC trader commitments-futures Weekly; 1930 GMT
By Francis Kan
SINGAPORE, July 22 (Reuters) - Brent crude futures rose on Friday, as Europe's sweeping new action on the debt crisis and signs of progress on a U.S. deficit reduction deal offset weak economic data from the world's second largest oil consumer, China.
The International Energy Agency's decision to not release more oil from emergency reserves also supported prices.
Brent
An emergency summit of leaders of the 17-nation euro zone pledged on Thursday to conduct a second bailout of Greece with an extra 109 billion euros ($157 billion) of government money, plus a contribution by private sector bondholders estimated to total as much as 50 billion euros by mid-2014.
"Sentiment is positive today because of the news out of Europe. The euro zone leaders managed to keep expectations low before the summit, the announcement of package gave the market a boost," said Chen Xin Yi, a commodities analyst with Barclays Capital.
The news of the euro zone rescue package pushed Asian stocks and the euro to a two-week high on Friday, while demand for safe-haven assets weakened. Gold fell to around $1,590 an ounce, about $20 below a record high of near $1,610 set on Tuesday.
Oil prices dipped on Thursday after data showed China's manufacturing contracting for the first time in a year in July, as monetary tightening and sluggish global demand weighed on the economy, according to HSBC flash PMI.
Commodity markets are focused on the economy of China as a major source of future demand growth.
"We expect a slowdown in China's demand growth, but actual apparent consumption is still expected to remain high with the latest June data release indicating apparent consumption still at a high level of 9 million barrels per day ," said Chen.
China's apparent oil demand gained only 1 percent from a year earlier to 8.99 million barrels per day (bpd) in June, the slowest growth in more than two years, Reuters calculations from official data showed.
According to technical charts, Brent oil is biased to rise to $120.82 a barrel while U.S. crude has an upside target of $101.53 a barrel, said Reuters market analyst Wang Tao.
U.S. DEBT, IEA DECISION
Oil prices also received support from signs of progress on a U.S. deficit-reduction deal that would stave off a devastating default, and news that IEA members decided against releasing more oil stockpiles despite the threat of high prices to economic recovery.
With the clock ticking toward an Aug. 2 deadline to raise the U.S. debt ceiling, President Barack Obama and the senior Republican in Congress, House Speaker John Boehner, worked toward a budget plan that would include deep spending cuts but might leave tax reform for later, congressional aides said on Thursday.
The world's top oil consuming countries decided against releasing more stocks into the market even though high prices still weigh on the global economy, saying they believed producers have started pumping more. (Editing by Himani Sarkar)