* Libya says will take to court foreign firms buying oil from rebels
* U.S. crude stockpiles fall, but rise at Cushing delivery hub
* Dollar strengthens to seven-week high, weighing on oil
SINGAPORE, Jan 9 (Reuters) - Brent crude rose towards $108 a barrel on Thursday, supported by continued concerns over supply from the Middle East and North Africa, but gains were capped by a stronger dollar.
Brent has traded in a tight range this week as investors balanced expectations of rising supply from Libya with increased tensions between government forces and armed rebels in the North African country.
"Brent looks relatively stable at the moment compared to WTI," said Ric Spooner, market strategist at CMC Markets in Sydney. "Brent is hanging around its 200-day moving average at the moment, and that is creating some nausea for investors, who are looking for direction in the market."
Brent crude for February delivery was 28 cents higher at $107.43 per barrel at 0335 GMT, after settling 20 cents lower.
U.S. oil was up 33 cents at $92.66. The contract shed $1.34 to end at a six-week low on Wednesday as a large build in crude stockpiles at the contract's delivery point in Cushing, Oklahoma, weighed on the market.
While the Cushing stocks rose, total U.S. crude stocks fell by 2.7 million barrels in the week to Jan. 3, data from the U.S. Energy Information Administration (EIA) showed.
The overall crude inventories fell for the sixth straight week, totalling 33.5 million barrels for the period, the largest six-week drop since October 1990.
The drop comes ahead of refiners entering maintenance season, which will cut demand for crude. Still, the commercial stocks remain near historical highs due to growing oil production in the United States.
SEE YOU IN COURT
Libya said Wednesday it will stop doing business with and take to court any foreign firms trying to buy oil from eastern ports seized by armed protesters.
The statement came after tensions built this week with rebels inviting foreign firms to buy crude from them and the Libyan navy firing at a tanker trying to load crude in a terminal occupied by rebels.
That has raised new worries about the country's exports despite a return of some of its production.
Brent prices fell as much as $6 per barrel last week, after the news that Libya would restart its key El Sharara oil field.
The country is currently producing around 650,000 barrels per day (bpd) of oil, of which 510,000 bpd is being exported, Oil Minister Abdelbari Arusi told Reuters on Wednesday.
Gains in Brent were limited by a stronger dollar, which hit a seven-week high against a basket of major currencies. A stronger dollar makes commodities priced in the greenback more expensive to holders of other currencies.
Investors will look to U.S. non-farm payrolls on Friday for signs of continued recovery in the world's largest economy, which may bolster speculation of imminent cuts in the Federal Reserve's commodity-friendly stimulus programme.
(Reporting By Jacob Gronholt-Pedersen; Editing by Tom Hogue)