UPDATE 7-Brent crude edges lower as supply concerns ease
* Brent oil eases on Libya deal, Iraq pipeline
* Dollar dips after hitting three-year high
* Protests in Egypt stoke supply concerns
* U.S. crude hits 14-month high in the wake of jobs data
NEW YORK, July 8 (Reuters) - Brent crude oil fell on Monday as the announced returns of a Libyan oilfield and an Iraqi pipeline eased concerns about global oil supplies following an early rally to a three-month high above $108 a barrel because of continuing unrest in Egypt.
Libya's major Sharara oilfield will resume operations after an agreement was reached with the armed group that shut it down last month, a senior Libyan oil source said on Monday. On Sunday, Libyan officials said they reached an agreement with security guards who shut down two oil export terminals in the east of the country to demand better working conditions.
A pipeline from Iraq to the Turkish port of Ceyhan will resume operations in two to three days following an interruption caused by a leak, two sources in Iraq's state-run North Oil Company (NOC) said on Monday.
The drop comes after oil prices posted their biggest weekly gain in a year last Friday as tension in Egypt rattled markets and better-than-expected U.S. labor data sparked concern about the wind-down of the Federal Reserve's monetary stimulus.
"The Libyans did restart the export terminal so that lent itself to today's softer crude values and there definitely is profit-taking" following last week's gains, said Andy Lebow, vice-president at Jefferies Bache in New York.
Brent, the European benchmark, was down 40 cents at $107.32 a barrel by 12:39 p.m. EDT (1639 GMT) after hitting $108.04, its highest since April 4.
U.S. crude slipped 10 cents to $103.12 after earlier touching a new 14-month high of $104.12.
The spread between the two benchmarks was at $4.20 after earlier widening out to $4.76 and narrowing to $3.78 in a volatile day in spread trading.
"The market is a bit less concerned about a major disruption in Egypt and was probably overbought a little bit going into the holiday weekend," said Phil Flynn, an energy analyst at Price Futures Group.
He said it was not unusual for prices to surge ahead of holiday weekends. U.S. markets were closed on Thursday for the Independence Day holiday.
"Going into the holiday weekend, we're always nervous about geopolitical risk and the market has a tendency to overcompensate, so we're seeing some of that protection buying start to come off," he added.
At least 42 people were killed in Cairo on Monday, medical sources said. Islamist protesters angered by the military overthrow of President Mohamed Mursi said they were fired on at the Cairo military barracks where he was being held.
Any conflict in the Middle East raises worries of disruption at major oil-producing areas or oil shipments.
So far, ports and shipping through the Suez Canal - through which a major portion of the world's oil is shipped - have been operating normally.
"It is Egypt's position as a major transit point for global crude oil movements that explains the current concern and geopolitical risk premium assigned to the goings on in that country," said a research note from Standard Bank.
Investors are also keeping an eye on the euro zone, where euro zone finance ministers will decide on Monday if Athens gets the cash it needs all at once or by drip feed. Greek officials have offered new promises to redouble reform efforts to keep international financial aid flowing.
(Additional reporting by Peg Mackey in London and Jessica Jaganathan in Singapore; Editing by Chris Reese and Andre Grenon)