* Markets expect U.S. economic stimulus to continue
* Weak diesel cash prices weigh on oil
* Libyan oil production rises to 600,000 bpd
* North Sea oil loadings to dip in March
(Rewrites top, adds analyst's quote, updates prices)
NEW YORK, Feb 10 (Reuters) - Brent oil fell by nearly $1 per barrel in mid-afternoon trading on Monday, pressured by sinking heating oil prices as the market looked toward the end of a long and frigid winter and as supplies increased from Libya and the North Sea.
Investors also awaited direction from the new head of the U.S. Federal Reserve on the course of the central bank's monetary policy.
Intense and relentless cold has propped up oil prices as demand for heating fuels skyrocketed and refiners pumped out distillates. That is set to yield next week as temperatures in large cities are expected to moderate.
By afternoon, U.S. heating oil futures slipped by nearly 2 percent below $3 per gallon, pressured by weak diesel cash prices that also weighed on oil, said Stephen Schork, editor of the Schork Report in Villanova, Pennsylvania.
"This is a lack of follow through from Friday's spike, coupled with weak cash markets," Schork said. "People are just bailing on crude right now.
March Brent crude was down 87 cents at $108.70 a barrel at 1:31 p.m. EST (1831 GMT), after reaching a high of $109.75, its loftiest since Jan. 2.
The March contract expires at the end of trading on Thursday. Brent oil for April delivery was trading 83 cents lower at $108.02. U.S. crude was up 3 cents at $99.91, after rising to $100.55, a 2014 high.
The spread between the two benchmarks widened earlier in the session to $10 for the first time in a week, then narrowed below $9 per barrel <CL-LCO1=R>.
Fed chief Janet Yellen delivers her first testimony to Congress this week and markets expect her to indicate she will stay the course on tapering the Fed's bond buying program.
The Fed has been cutting its bond purchases by $10 billion a month as the U.S. economy has strengthened. The bond buying program has provided support for commodity and equity markets.
Labor Department data on Friday showed a drop in the overall unemployment rate to a five-year low in January even though the number of jobs added was less than expected. Market analysts said the impact of exceptionally cold weather across the United States may have skewed the data.
In Europe, output at Britain's Buzzard oilfield returned to a normal rate of 200,000 barrels per day (bpd) or more, following its fourth outage of 2014 last week.
Buzzard, Britain's largest oilfield, will undergo a total nine weeks of maintenance in 2014, far more than the two weeks traders had expected.
Lower North Sea loadings for March could also be interpreted as less demand for crude, which would weigh on Brent prices, analysts said.
Libya's current oil production is around 600,000 bpd with the El Sharara oilfield producing 327,000 bpd and national exports now at 450,000 bpd, a spokesman for the country's National Oil Corp (NOC) said.
Saudi Arabia produced 9.767 million bpd of crude oil in January, down from 9.819 million bpd in December.
An easing of political tension over Iran's nuclear program could weigh on oil as supply from the OPEC producer may rise if Tehran reaches a final deal with world powers. Iran and six world powers are due to start a final round of talks on Feb. 18 that is aimed at reaching a broad diplomatic settlement.
(Additional reporting by Christopher Johnson in London and Florence Tan in Singapore; Editing by Dale Hudson, Jane Baird, Marguerita Choy and Peter Galloway)