* Iran, world powers may be near interim nuclear deal
* China's October crude imports down 14 pct yr-on-yr
* Heavy fighting rocks Libyan capital
(Updates detail, prices; paragraphs 4, 6)
LONDON, Nov 8 (Reuters) - Brent crude oil steadied around $104 a barrel on Friday, close to its lowest since early July, as Western powers stepped up efforts to reach a deal with Iran over its nuclear programme that could provide some relief from sanctions.
Trade sanctions have removed more than 1 million barrels per day (bpd) of Iranian crude oil from world markets. Traders say any increase in supply from the Islamic Republic could hit prices hard.
Diplomats said a deal was far from certain and that it would in any case mark only the first step in a long process towards settling the dispute with Tehran, but that an outline agreement could be concluded on Friday.
One of the ideas under consideration is the disbursement in instalments of up to around $50 billion of Iranian funds frozen in foreign accounts for many years. There could also be a temporary relaxation of trade restrictions, diplomats say.
"Talks between Iran and other world powers to put an end to the nuclear stand-off seem to be progressing well, and this is weighing on Brent," analysts at Phillip Futures said in a note.
Brent was up 40 cents at $103.86 a barrel by 1410 GMT, after losing $1.78 overnight. U.S. oil was up 20 cents at $94.40 a barrel, after dropping 60 cents on Thursday.
Brent is near its lowest since the first week of July.
Oil found some support from news that Saudi Arabia cut its crude output in October to 9.75 million bpd from 10.1 million in September. The figures were given to Reuters by an industry source familiar with the matter.
"Saudi production is still high," said Richard Mallinson, a geopolitical analyst at Energy Aspects. "Summer demand may have eased a bit, and the market was slightly better supplied."
CHINA'S IMPORTS, IRAN TALKS
Chinese economic data also offered support, showing a rebound in export growth from the world's second-biggest oil consumer. But Chinese crude oil imports fell to a 13-month low after hitting a record high in the previous month.
China imported 4.81 million bpd of oil in October, down 13.8 percent on a daily basis from a year ago, according to the General Administration of Customs.
October imports were down 144,000 bpd from a record 6.25 million bpd in September, possibly because oil firms cleared some cargoes through customs ahead of a long national holiday in the first week of October, traders said.
Oil got further support from fresh civil unrest in Libya, where some of the worst fighting in months broke out in Tripoli on Thursday.
But oil markets are generally well supplied, analysts say, and the apparent improvement in relations between Iran and the West is raising the possibility of even more supplies.
U.S. Secretary of State John Kerry was set to join the talks between major powers and Iran in Geneva in an attempt to nail down a long-elusive accord to start resolving the stand-off over Tehran's atomic aims.
Adding impetus to rumours that a deal may be imminent were comments by Israeli Prime Minister Benjamin Netanyahu saying Iran would be getting "the deal of the century".
"The theme is overwhelmingly bearish (for oil prices). The long-term fundamental picture (for supply) is comfortable anyway you look at it," VTB Capital oil and commodities strategist Andrey Kryuchenkov said.
(Editing by Keiron Henderson and Jane Baird)