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UPDATE 9-Brent crude finishes lower; Libyan supply in sight

Anna Louie Sussman
Monday, 6 Jan 2014 | 3:42 PM ET

* Libyan national output could hit 600,000 bpd

* Slowing Chinese economy drags

* Bitter U.S. winter could hit demand, output

(Updates prices to settlement)

NEW YORK, Jan 6 (Reuters) - Oil prices seesawed on Monday, ending the session slightly lower, as traders weighed reports of production resuming at a Libyan oilfield against new threats to shipments from a port controlled by protesters.

Brent and U.S. crude dipped on a day of mixed messages, including a shipping drama off Libya's shore and a deep freeze across the United States that threatens to disrupt oil production but also curtail demand.

In an apparent escalation of the months-long civil unrest in Libya, the country's armed forces warned they would not allow any oil tanker to load at ports seized by protesters. The Libyan Navy had blocked a Maltese-flagged vessel from trying to reach a dock and opened fire as it approached the port of Es Sider, officials said.

The price volatility followed Brent's biggest weekly fall in six months after the restart of the El Sharara oilfield following a two-month blockade by protesters.

The restart of the 340,000-barrel-per-day (bpd) field will more than double Libyan crude production, which had fallen to 250,000 bpd from 1.4 million bpd in July.

"We're still seeing most of the geopolitical risk hitting Brent, whether it be Libya or Iraq," said Phil Flynn, analyst at the Price Futures Group in Chicago.

On Monday, Iraq's prime minister urged people in the besieged city of Falluja to drive out al Qaeda-linked insurgents to pre-empt a military offensive that officials said could be launched within days.

U.S. crude futures extended losses for a fifth straight session, with traders citing ample domestic supplies of crude oil.

"I think it's a storage issue. There's a lot of crude oil out there," said Bob Yawger, director of commodities futures at Mizuho Securities in New York.

"You're getting a fading sense of support from equities. It shows there a certain degree of skepticism as far as the risk assets are concerned."

Brent crude futures for February ended lower for the fifth straight session, losing 16 cents to settle at $106.73, after earlier climbing over $1 to a session high of $107.96. The international benchmark recovered in post-settlement trading, up 18 cents to $107.07 by 3:14 p.m. EST (2014 GMT)

U.S. crude fell 53 cents to settle at $93.43 per barrel. The contract lost $1.48 a barrel on Friday and posted its biggest weekly drop since June 2012.

DEEP FREEZE

Energy markets kept an eye on the weather in North America, where Midwestern states experienced the lowest temperatures in two decades and forecasters said life-threatening cold was heading east.

The severe cold weather is threatening to curtail booming oil production as it disrupts traffic, strands wells and interrupts drilling and fracking operations.

Snow, ice and the sharp cold can limit gasoline demand and disrupt oil production and refining but also boost consumption of middle distillates such as heating oil.

Concerns over slowing growth in China put the brakes on 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, adding to evidence 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 one thousand people dead and disrupted the oil supply from the African country.

The talks could be delayed 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 through its pipeline.

(Additional reporting by Jacob Gronholt-Pedersen; Editing by Joseph Radford, David Goodman, David Evans, Steve Orlofsky, Jeffrey Benkoe and Chizu Nomiyama)