UPDATE 1-Brent rises above $109 on Libya, gains capped ahead of Fed meet
* East Libyan autonomy group will not reopen oil ports, challenges Tripoli
* U.S. sanctions move angers Iran, Russia sees threat to nuclear deal
* Fed could start to trim stimulus, set off year-end fireworks
* China's factory sector expands for fifth consecutive month
(Adds comments, updates prices)
SINGAPORE, Dec 16 (Reuters) - Brent futures rose above $109 a barrel on Monday as supply concerns revived after Libya failed to reach a deal with tribal leaders to end the blockade of several oil-exporting ports.
Crude prices, however, may stay in a range much like most other markets as investors await the U.S. Federal Reserve's decision on tapering its monetary stimulus, which has been a key driver of investment in global commodities.
Brent crude rose 40 cents to $109.23 a barrel by 0521 GMT, after posting a weekly loss of 2.5 percent. U.S. oil fell 28 cents to $96.32 after ending 90 cents lower and declining 1 percent for the week.
"Libya didn't manage to reach an agreement to restart oil exports even though the government had said it expected the blockade to end," said Ken Hasegawa, a commodity sales manager at Newedge Japan.
"That's a support factor for oil, particularly Brent."
The port blockages, along with strikes by oil workers, civil servants, tribesmen and other protesters at oilfields across the desert country, have cut vital oil exports to 110,000 barrels per day from more than 1 million in July.
Western powers worry Libya will slide into chaos as the Tripoli government struggles to rein in militias and tribesmen who helped topple Muammar Gaddafi in 2011 but kept their weapons and control parts of the OPEC-member country.
Investors are also watching to see if a recent move by the United States to expand a sanctions blacklist may block the implementation of a historic deal between Iran and world powers on Tehran's controversial nuclear programme.
Data showing China's vast factory sector expanded for the fifth straight month, even though the reading in December slowed to a three-month low, underpinned oil prices as well.
Brent may trade between a high of $113 and a low of $105-$106 a barrel and U.S. oil in a $94-$99 range until there is clarity from the U.S. Fed on when it may start tapering its $85 billion in monthly bond buying, Hasegawa said.
The Fed meets on Tuesday and Wednesday to discuss the tapering and opinion is divided on whether it will move this week or wait for early next year. A cut in its stimulus would boost the dollar, weighing on most commodities, including oil, that are priced in the currency.
"Markets were initially expecting tapering to be announced in March 2014 but with increased prospects of an earlier tapering, markets will continue to be jittery as we lead up to the end of the Dec. 17-18 Federal Open Market Committee (FOMC) meeting," analysts at Phillip Futures said in a note.
Growth in jobs, retail sales, services and overall output in the world's biggest economy - combined with last week's breakthrough budget deal in Washington - has convinced some economists that the Fed will announce a tapering on Wednesday.
But others expect it to wait for more evidence of steady recovery before taking a decision.
"I don't think there will be any change in this week's meeting," Hasegawa said. "The Fed won't want to take a decision in haste. They won't want to rush."
(Editing by Himani Sarkar)