UPDATE 3-Oil holds above $108 before Libya ports restart

Joshua Franklin
Friday, 13 Dec 2013 | 4:39 AM ET

* Libya aims to restart three eastern oil ports on Sunday

* Upbeat U.S. data raises prospect of Fed stimulus wind-down

* Pipelines set to drain Cushing glut

(Updates throughout changes dateline, previous SINGAPORE)

LONDON, Dec 13 (Reuters) - Brent crude oil held above $108 a barrel on Friday as traders eyed a restart of ports in eastern Libya and a possible scaling back of the U.S. Federal Reserve's massive stimulus programme.

The Libyan government is set to reopen three eastern ports on Sunday that could increase output at the OPEC producer from the current 250,000 barrels per day (bpd).

Upbeat economic data from the United States has heightened speculation that the U.S. Federal Reserve may start trimming its bond purchases next week, a move that could strengthen the dollar and weigh on demand for dollar-denominated commodities such as oil.

But stronger U.S. economic growth could also lead to higher fuel demand in the world's largest oil consumer.

January Brent was down 10 cents at $108.57 a barrel by 0930 GMT, after falling more than $1 on Thursday. U.S. crude futures for January were down 10 cents at $97.40.

"The market is looking at a combination of possible Fed tapering and Libya," said Bjarne Schieldrop, chief commodity analyst at SEB Bank.

Analysts were doubtful as to whether Libya could raise its output to pre-protest levels of more than 1 million bpd as internal conflicts continue to threaten the nation's oil industry.

Brent was supported by supply concerns arising from bombings near the Suez Canal, a major transportation channel for global oil markets.

U.S. oil was also boosted by news new pipelines in the coming weeks and next year could help draw down U.S. stockpiles.

Shell's Houston-to-Houma pipeline and TransCanada's southern leg of the Keystone XL will start operations over the next few weeks, while the Seaway Twin, to move crude from Cushing to Texas, is expected to start in the second quarter of 2014.

Brent has slipped by more than 2 percent so far this week, the steepest weekly loss in seven weeks, and its premium to U.S. crude futures closed at $11.17 on Thursday, down more than $5 since the start of the month.

"It should be a general trend now that crude stocks in the U.S. continue to decline and so we see a further contraction of the spread," said SEB's Schieldrop.

Traders also watched the progress of nuclear talks between major powers and Iran which could lift sanctions on the OPEC producer's oil exports and increase global supply.

The European Union said on Friday Iran and six world powers need more time to work out complex technical steps on implementing last month's deal for Tehran to curb its nuclear programme.

The U.S. Congress may hold off on new sanctions over Iran's nuclear programme, but existing ones remained in place, preventing a rise in oil exports.

(Additional reporting by Florence Tan in Singapore; Editing by Christopher Johnson)