UPDATE 2-Brent rises towards $110 on news of Libyan PM's kidnapping
* Libyan prime minister kidnapped -govt
* U.S. crude stocks rise by most in a year
* Shell shuts 150,000 bpd Nigerian pipeline
* Coming up: U.S. weekly jobless claims at 1230 GMT
SINGAPORE, Oct 10 (Reuters) - Brent oil rose on Thursday after news of the kidnapping of Libya's prime minister raised concern about new supply disruptions from the North African country.
Armed men seized Ali Zeidan from a hotel in the Libyan capital, Tripoli, and took him to an unknown location, the government said.
"Everybody is watching this, and I believe it can move the market," said Ken Hasegawa, a commodity sales manager at Newedge Japan, although he doubted the rise would be big unless there was any disruption to supply.
Libya's oil output has risen to 700,000 barrels per day, after falling at mid-year to its lowest since the country's 2011 civil war as strikes, militias and political activists blocked most of the country's oilfields and ports.
Since violence broke out, the government's fledgling army and police force have struggled to deal with armed protesters.
"This kind of news shows the uncertainty over Libyan 1/8oil supply 3/8," said Hasegawa.
Brent futures were 64 cents higher at $109.70 per barrel at 0627 GMT. The benchmark ended the previous session $1.10 lower but had steadied just above $109 prior to news of the Libyan kidnapping.
U.S. oil was 43 cents higher at $102.04 per barrel.
Global oil prices sank on Wednesday after U.S. crude stocks rose by 6.8 million barrels in the week to Oct. 4, well above forecasts by analysts of a 1.5 million barrel increase.
Over the past three weeks, crude stockpiles have increased by a total of 14.9 million barrels, according to the U.S. Energy Information Administration, the biggest three-week increase since April 2012.
Uncertainty over the budget standoff in Washington continued to cloud the outlook for demand, although President Barack Obama launched a series of White House meetings with lawmakers to search for a way to end the impasse.
"The key thing at the moment is the supply situation. We saw a steep increase in stocks, which took its toll on prices," said Ric Spooner, chief market analyst at CMC Markets in Sydney, speaking before the Libyan news broke.
"And now macroeconomic concerns building over the U.S. budget crisis are drawing in the same direction, leading to softening oil prices."
Further gains in oil prices were limited by the dollar , which rose against major currencies on Thursday after the minutes of the Federal Reserve's September meeting showed the decision not to slow stimulus was a "close call".
The nomination of Janet Yellen also removed uncertainty in financial markets about the next head of the central bank.
The currency had hovered near an eight-month low in the past week, supporting dollar-denominated oil prices.
Shell Nigeria said on Wednesday it had shut its Trans Niger Pipeline (TNP) after reports of leaks, deferring 150,000 barrels per day of crude oil just 10 days after the pipeline was re-opened.
(Editing by Tom Hogue and Alan Raybould)