(Reuters) - Brent oil hit a one-week high above $99 a barrel on Monday after a victory for Greece's pro-bailout political parties revived risk appetite, but prices swiftly came off peaks as focus turned to Europe's other debt-hit economies like Spain and Italy.

Political parties supporting Greece's international bailout will begin forging a government after a victory over leftists staved off the prospect of the debt-laden country leaving the euro and brought relief to global markets.

The market is going to digest the Greek elections and once the initial euphoria dies down, we will see the market rebalancing and turning their attention to Italy and Spain, said Jim Ritterbusch, president of trading consultancy Ritterbusch & Associates in Galena, Illinois.

We should see the concerns over Italy and Spain restricting any further upside moves on crude.

Brent crude was up $1.18 at $98.79 a barrel by 0638 GMT, well off a one-week high of $99.50 touched earlier. U.S. oil gained 75 cents to $84.78, after hitting a one-week top of $85.60.

The initial Greek vote results drew expressions of relief from world leaders who are due to kick off a G20 meeting in Mexico on Monday.

But analysts warned the euro bloc leaders would need to act swiftly to present a roadmap towards banking and fiscal union, to ensure adequate bank funding and to contain a crisis, which has already spread from Greece to Ireland, Portugal and Spain and which now threatens Italy, one of the world's biggest sovereign debtors.

The euro zone debt crisis remains among the biggest threats to the global economy and fuel demand.

Analysts said they would be watching China's HSBC flash manufacturing PMI and a Federal Open Market Committee meeting later in the week as these could impact oil markets.

In particular, investors are looking for clues from the Fed for another round of quantitative easing given a recent spate of weak U.S. economic data.

Monetary policy is not likely to be as effective as it was earlier in the euro crisis, Ric Spooner, chief market analyst for CMC Markets, said in a note to clients.

However, any moves by the Fed such as an extension of their operation twist program would be supportive for equity markets, increasing the opportunity cost and long run risk of alternative fixed interest investments.


Oil players are also watching the start of talks in Moscow between world powers and major oil producer Iran.

The United States, Russia, China, France, Britain and Germany are hoping to win concessions from Tehran and forestall a potential new war in the Middle East that could disrupt oil supplies.

The implications of failure could be devastating as Israel has threatened to bomb Iran if no solution to the standoff is reached.

Investors are hopeful of progress this week, however.

There is some glimmer of hope that we will see a positive outcome in the Iranian nuclear discussions. This remains a key view for the market, Ritterbusch said.

Elsewhere, Saudi Arabia's elderly king led funeral prayers on Sunday for his heir, Crown Prince Nayef, whose death forces him to find a new successor capable of tackling domestic unemployment, bitter rivalry with Iran and turmoil in close Arab neighbors.

The world's top oil exporter is locked in regional rivalry with Shi'ite Iran, which it suspects of fomenting unrest among its Shi'ite Muslim minority and in allied Gulf Arab states.

(Editing by Manolo Serapio Jr. and Ed Davies)