UPDATE 5-Brent falls below $110, Libya plans oilfield restart
* Libya hopes to restart El Shahrara oilfield in days
* China factory activity slows in Dec - govt, HSBC
* Coming up: U.S. Dec ISM Manufacturing PMI; 1500 GMT
LONDON, Jan 2 (Reuters) - Brent crude sank below $110 a barrel on Thursday after Libya prepared to restart a major oilfield and on slowing economic expansion in China, the world's no. 2 oil consumer.
Libya's National Oil Corp (NOC) plans to restart the El Sharara oilfield and hopes to resume output within days after protesters agreed to suspend a strike that's blocked the field since the end of October.
Adding pressure on oil, growth in factory activity in China, the world's second largest fuel consumer, slowed in late 2013, according to purchasing managers' indexes published by the government and HSBC, weighed by shrinking export orders.
Brent crude fell 90 cents from Tuesday to $109.90 a barrel by 1216 GMT. U.S. crude was off 40 cents at $98.02. Markets were shut on Wednesday for the New Year.
"The oil market appears to be running out of steam," said Christopher Bellew, broker at Jefferies Bache.
Production in Libya, Iran, Iraq and the United States will be closely watched this year, in addition to any signs of further stimulus tapering by the U.S. Federal Reserve.
In Libya, oil output is still less than 250,000 barrels per day (bpd), down from 1.4 million bpd in July, as ports in the eastern part of the country remain shut. But the restart of El Sharara could see exports start to recover.
"Information out of Libya needs to be taken with some caution until confirmed by facts, but this could bring a temporary increase in Libya production to about 600,000 barrels a day," said Olivier Jakob of Petromatrix in Zug.
"Exports from Sharara would be easier to materialise if the protests are indeed lifted as the field exports from the port of Zawiya, and that port is open."
Iran and six world powers will implement an agreement in late January obliging Tehran to suspend its most sensitive nuclear work, an Iranian official was quoted as saying on Tuesday.
That raises the prospect of an increase in Iranian crude exports over 2014, according to some analysts.
"It may be six months or more before all of the Iranian oil returns to the market - and it will depend on Iran's political compliance," Jason Schenker, president of consultancy Prestige Economics said in a note.
"When that happens, however, Brent crude oil prices could fall swiftly."
Data from the American Petroleum Institute on Tuesday showed a drop of 5.7 million barrels in U.S. crude stockpiles, nearly double the 3-million-barrel draw expected by analysts surveyed by Reuters.
The U.S. Energy Information Administration (EIA) will release its data on Jan. 3 due to the holiday.
Lower U.S. inventories helped buoy the West Texas Intermediate (WTI) oil price in 2013. The average for the past year was $98.05 a barrel, up 4.2 percent from $94.14 in 2012.
The average Brent price for 2013 was $108.70 in 2013, down 2.7 percent from $111.68 in 2012 in a well-supplied market despite disruptions in the Middle East, Africa and North Sea.
(Additional reporting by Florence Tan in Singapore; Editing by William Hardy)