Brent slips below $110, set for weekly rise
* Brent, WTI set for second weekly gain in three
* Fed taper affirms improved U.S. economic outlook, fuel demand
* Libya crude exports fall to 110,000 bpd
SINGAPORE, Dec 20 (Reuters) - Brent crude slipped below $110 a barrel on Friday, but was heading for its second weekly gain in three, buoyed by Libyan supply cuts and a rosy outlook for fuel demand in the United States, the world's largest oil consumer.
Oil gained this week after U.S. crude stockpiles fell while the Federal Reserve's decision to start winding down its massive bond buying programme supported the view that the world's biggest economy is on the path to recovery.
"The Fed's moves yesterday are clear endorsement of growth in the U.S. economy and that's important for global energy demand," said Michael McCarthy, chief market strategist at CMC Markets in Sydney.
U.S. crude futures are heading for a rise of more than 2 percent this week while Brent could gain 1 percent.
February Brent crude fell 36 cents to $109.93 a barrel by 0250 GMT, while U.S. crude for February delivery was at $98.84 a barrel, down 20 cents.
Low trading volumes are keeping prices volatile, McCarthy said, although Brent and West Texas Intermediate (WTI) are likely to stay supported above key technical resistance levels of $110 and $98.50 a barrel, respectively.
"With so many areas pointing in the same direction, that is upwards for oil prices, we'll continue to see good support over the short term for energy," McCarthy said, referring to recent improvements in economic data from the United States and Asia and a persistent cut in Libyan crude supply.
In the United States, demand for petroleum products rose to the highest November level in six years, data from the American Petroleum Institute showed on Thursday. A larger than expected drawdown in crude stockpiles last week also underpinned prices.
In Libya, crude exports have dropped to 110,000 barrels per day (bpd), from over 1 million bpd in July, and the OPEC producer is stepping up fuel imports as a mix of militias, tribesmen and civil servants demanding political rights or a greater share of Libya's oil wealth have occupied several oilfields and ports.
"It appears that the central government might have lost control of some of the export terminals," McCarthy said, adding that the absence of Libyan oil supply was underpinning prices.
Traders were also watching the progress of talks between Iran and six world powers as they work out how to put into practice a landmark deal obliging Tehran to curb its nuclear programme in return for some relief from economic sanctions.
The easing of sanctions on the OPEC producer will lead to a rise in oil exports which could depress prices.
(Reporting by Florence Tan; Editing by Ed Davies)