Brent crude fell over $1 on Thursday after mixed U.S. data, against a backdrop of instability in the Middle East and new eurozone debt worries following the resignation of Portugal's prime minister.

At 1443 GMT, May Brent was down 9 cents to $115.46 a barrel after dipping over $1 to $114.50 on mixed U.S. data.

U.S. crude oil futures pared gains in choppy trading, but was still up 50 cents on the day to $106.25 after data showing U.S. February durable goods orders fell, against expectations for a small rise.

The durable goods number offset a separate report showing that U.S. initial jobless claims fell week on week.

Brent crude prices were already lower ahead of the data on heightened concerns about euro zone debt problems following the resignation of Portugal's Prime Minister Jose Socrates.

We have a tug of war between positive and negative factors for oil prices, said Carsten Fritsch, an oil analyst at Commerzbank.

The bullish factors are still in place: the war in Libya, unrest in other parts of the Arab world, a greater need for fossil fuels in Japan, and pretty bullish inventory data yesterday are all supportive of higher oil prices.

Fritsch said that despite the resignation of Portugal's Socrates, which had weighed on Brent overnight, oil prices could probably rise further.

The developments in Libya and the Middle East are still the most important factor to watch, he said.

Socrates resigned on Wednesday after the Portuguese parliament rejected his government's latest austerity measures, which were designed to avoid a bailout.

Eurozone leaders will meet in Brussels on Thursday for a two-day summit to address sovereign debt problems which have dogged the region.

Portugal faces a bond redemption of over 4 billion euros ($5.63 billion) in mid-April but under its constitution does not have time to hold a general election before then.

The resignation of the Portuguese prime minister is creating some risk on/risk off (trading), depending on which way the wind is blowing, said Thorbjorn Bak Jensen, an oil market analyst at Global Risk Management.

Technical factors are also playing a part. Rob Montefusco, an oil trader at Sucden Financial in London, said that with the differential between U.S. crude and Brent narrowing over the last few days, traders have been unwinding their Brent/U.S. arbitrage positions.

(The differential) went under $9 today -- it might find some support at around the $8 level. There is still a fear factor because of what's going on in the Middle East, and China still has a thirst for oil so I don't see it correcting too much further to the downside, he said.

MIDDLE EAST TENSIONS

The coalition enforcing a U.N.-backed no-fly zone over Libya fired 14 Tomahawk missiles at the forces of leader Muammar Gaddafi overnight, the U.S. military said

But it failed to prevent tanks reentering the western town of Misrata overnight and besieging its main hospital.

At least 37 protesters were killed in a confrontation with security forces in Syria on Wednesday, a hospital official said. Around 20,000 people marched on Thursday in the funerals for nine of those killed.

In Yemen, presidential guards loyal to President Ali Abdullah Saleh clashed in the town of Mukalla with army units backing opposition groups and protesters demanding his removal.

Germany has joined a growing number of western nations urging Syria to halt the violence against protesters.

We expect the MENA unrest to pose further upside risks to oil prices, James Zhang, an energy analyst at Standard Bank Commodities said in a note.

That said, the physical market appears to be well supplied for now. Given the near record high speculative length in the oil market and a seasonal slowdown in demand, the downside risk also increases.

(Additional reporting by Alejandro Barbajosa and Robert Gibbons)