UPDATE 8-Oil rises for second day as investors watch Syria
* Investors wait to see if diplomacy averts attack on Syria
* Libya declares force majeure on three more oil ports
* OPEC members say oil market well supplied
* Federal Reserve moves next week also awaited
(Updates prices to settlement, adds paragraph on Whiting outage)
NEW YORK, Sept 12 (Reuters) - Global oil prices rose for a second straight day on Thursday as investors monitored diplomatic efforts to eliminate Syria's chemical weapons and Libya declared force majeure on another three ports.
The two-day rally follows two days of heavy losses that wiped $5 off the global Brent benchmark.
Libya's state National Oil Corp declared force majeure, a legal term to cover the suspension of contractual obligations, on three more ports that had not been exporting crude oil for more than two weeks, an NOC document showed on Thursday.
Political unrest had already seen Libya's oil output plunge to a 10th of usual production and exports fall to about 80,000 barrels per day earlier this month, pushing up oil prices.
"The market had sold off on the assurances we got from Libyan officialdom 1/8that exports could come back 3/8, but that is clearly not happening," said John Kilduff, a partner at Again Capital LLC in New York.
Syria applied on Thursday to sign up to the global ban on chemical weapons, a major first step in a Russian-backed plan that would see it abandon its chemical weapons arsenal to avert U.S. military strikes.
The RIA news agency quoted President Bashar al-Assad as saying in a television interview that Syria's fulfillment of this initiative was contingent on the U.S. ceasing its threats.
"The market doesn't know if we're going to war or peace, and it's trying to protect itself for both possibilities," said Phil Flynn, an analyst at the Price Futures Group in Chicago, Illinois.
While Syria is not a major oil producer, concerns had mounted that a wider conflict could spill over to key exporting countries, or disrupt shipping routes.
Benchmark Brent crude oil for October, which expires on Friday, rose $1.13 to settle at $112.63. The contract for November delivery rose $1.34 to settle at $111.53.
Brent had scaled six-month highs of $117.34 a barrel on Aug. 28, partly on rising Syria tensions.
U.S. crude rose $1.04 to settle at $108.60.
Brent's premium over U.S. crude narrowed to settle at $4.03 after widening to $4.46 earlier in the session.
Gasoline futures rose 5 cents, or nearly 2 percent, to settle at $2.76, which traders said may have been due to an ongoing outage of a gasoline-producing fluidic catalytic cracking unit at the 405,000 barrel-per-day Whiting, Indiana refinery.
The International Energy Agency (IEA) said on Thursday global oil supply should improve in the next few months as a rise in Saudi production had helped compensate for Libyan losses while demand was likely to ease as refineries go into seasonal maintenance.
"Brent... is staying where it is right now. Syria is priced in. There will be no military strike now, but it is not off the table completely - and that is supporting the downside," said Carsten Fritsch, an oil analyst at Commerzbank.
Diplomatic efforts to place Syria's chemical weapons under international control have intensified this week.
U.S. Secretary of State John Kerry and Russia's Foreign Minister Sergei Lavrov opened talks Thursday on disarming Syria's chemical weapons programs, but differences over the threat of strikes emerged at the outset of the expected two-day negotiations.
DEMAND EBBS, EYES ON FED
Gasoline stocks rose last week, data from the U.S. Energy Information Administration showed on Wednesday, suggesting that demand supported by the summer driving season had ended.
In addition, several members of the Organization of the Petroleum Exporting Countries (OPEC) said at an industry event in Seoul that the oil market was well balanced and there was no need to pump more for now.
Expectations are growing that the U.S. central bank will decide next week to begin reining in its monetary stimulus, although last Friday's disappointing U.S. jobs data has convinced many economists that any reduction might be smaller than some had believed.
Any cut in the Federal Reserve's bond-buying program would likely boost the dollar, pressuring oil and other dollar-denominated commodities.
(Additional reporting by Lin Noueihed, Yuka Obayashi and James Topham; Editing by Chris Reese, Andrew Hay and Gunna Dick)