UPDATE 4-Oil falls below $109 on potential Libyan ports restart

Joshua Franklin
Friday, 13 Dec 2013 | 6:25 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

(Adds comment, updates prices; paragraph 2-5)

LONDON, Dec 13 (Reuters) - Brent crude oil fell below $109 a barrel on Friday on prospects for ports in eastern Libya to resume exports and a possible scaling back of the U.S. Federal Reserve's massive stimulus programme.

Libya's government expects eastern tribes to reopen three oil ports this weekend, which could increase output at the OPEC producer from the current 250,000 barrels per day (bpd).

But there are doubts as to whether Libya can raise its output to pre-protest levels of more than 1 million bpd as internal conflicts continue to threaten its oil industry.

"Production in Libya for 2014 could be around 700,000 bpd, which is more than today but not fully stable back to 1.5 million bpd," said Bjarne Schieldrop, chief commodity analyst at SEB Bank.

January Brent was down 10 cents at $108.57 a barrel by 1100 GMT, after falling more than $1 on Thursday. U.S. crude futures for January were down 43 cents at $97.07.

Upbeat economic data from the United States on Thursday heightened speculation that the Fed may start trimming its monthly bond purchases as soon as next week.

The move 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.

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

U.S. oil also was supported by expectations that new pipelines starting in the coming weeks and next year could help reduce 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, and the Seaway Twin is expected to start moving crude from Cushing to Texas 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," SEB's Schieldrop said.

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 that Iran and six world powers needed 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 and Jane Baird)