UPDATE 6-Brent gains sharply on Libyan outage, spread widens
* Libyan crude oil exports fall sharply
* U.S. industrial output posts largest gain in 7 months
* Market focused on talks between Iran and world powers
NEW YORK, Oct 28 (Reuters) - Brent crude oil rose more than $2 a barrel on Monday after a sharp drop in Libyan oil exports revived supply concerns while strong gains in U.S. industrial output boosted demand hopes.
Oil production of OPEC-member Libya, dropped after new protests over the weekend at its oil fields and ports, boosting the European benchmark's premium over U.S. oil by about $1.50 a barrel.
Brent for December delivery was up $2.22 at $109.15 a barrel by 11:20 a.m. EDT (1520 GMT), snapping three days of losses. The contract breached the 100-and-200-day moving averages of $108.72 and $108.39.
U.S. crude was up 81 cents at $98.66 a barrel after touching the 200-day moving average of $98.68.
Brent's premium over U.S. oil benchmark West Texas Intermediate was last trading at $10.58.
"The key driver today for Brent is Libya," said Amrita Sen, chief analyst at consultants Energy Aspects in London.
Libya's crude oil exports have fallen to 90,000 barrels per day, compared with a capacity of more than 1.2 million bpd.
Oil prices were also lifted by an improved demand outlook and the expectation for better refining margins after data showed U.S. industrial production recorded its largest increase in seven months in September.
"The fact that industrial output has picked up means demand is actually strong for products and refining margins should pick up. It means end user demand is holding up." Sen added.
Investors are also keeping an eye on a two-day meeting of experts from Iran and six world powers on Wednesday. Sanctions against Iran have kept some one million barrels of oil off the market, underpinning oil prices.