UPDATE 5-Oil rallies after price fall on Libya oilfield restart
* Libya restarts key field, national output could hit 600,000 bpd
* Slowing Chinese economy, strengthening dollar also drag
* Bitter U.S. winter could hit demand, output
* Coming Up: U.S. factory orders at 1500 GMT
(Updates prices; paragraphs 4-5)
LONDON, Jan 6 (Reuters) - Brent crude oil rose more than $1 a barrel to above $107 on Monday, rebounding after its biggest weekly fall in six months on news of the restart of a key Libyan oilfield.
Crude supply from Libya is set to more than double after production at the El Sharara field resumed over the weekend as protesters ended a two-month blockade.
But doubts over the scale and pace of Libyan oil production increases helped oil futures markets to recover some ground.
Brent crude futures for February climbed $1.07 to a high of $107.96 before easing slightly to trade around $107.70 by 1330 GMT. It settled lower in the previous four sessions.
U.S. crude gained 35 cents to $94.31 a barrel. The contract lost $1.48 a barrel on Friday and posted its biggest weekly drop since June 2012.
"A big increase in Libyan output is bearish for oil," said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt. "In the past, forecasts of a quick resumption of (Libyan) oil exports have proven unfounded, so we need to wait and see."
The resumption of Libya's El Sharara field could lift the country's production to 600,000 barrels per day (bpd). Output from the OPEC member had fallen to 250,000 bpd from 1.4 million bpd in July, boosting international oil prices.
The restart of the field would be a rare success for Libyan Prime Minister Ali Zeidan, who has been trying to end a wave of oilfield and port blockages.
The situation in Libya remains volatile, with a different set of protesters now blocking an oil pipeline in the west that runs to the Mellitah export port.
"We have seen some new protests going on, so the actual return of supply to world markets will depend on how well the government controls the situation," said Chee Tat Tan, an investment analyst at Phillip Futures in Singapore.
Energy markets kept a wary eye on the weather in North America, where Midwestern states experienced the region's lowest temperatures in two decades and forecasters said that life-threatening cold was heading eastward.
Snow, ice and very cold temperatures can limit gasoline demand and disrupt oil production and refining, but they also tend to boost consumption of middle distillates such as heating oil.
Concerns over slowing growth in China and a strengthening dollar also countered gains in oil and other commodities.
Growth in China's services sector fell to a four-month low in December as business expectations dropped, a government survey showed on Monday, adding to evidence that the world's second largest economy lost steam at the close of 2013.
South Sudan's oil production remained a concern even after the government and rebels last week agreed to peace talks. Three weeks of fighting have left more than a thousand people dead and disrupted oil supply from the African country.
The talks could face delays after gunfire erupted in the country's capital on Sunday.
An official in neighbouring Sudan, through which land-locked South Sudan pumps its oil for export, said last week that 239,000 bpd of crude were being shipped though its pipeline.
(Reporting By Jacob Gronholt-Pedersen; Editing by Joseph Radford and David Goodman)