* Prospect of return of Libyan supplies limits gains
* Violence in Nigeria adds to supply worries
(Updates throughout, changes dateline from SINGAPORE)
LONDON, April 14 (Reuters) - Oil rose above $108 a barrel on Monday, on concern that escalating tension between Russia and Ukraine could lead to supply disruption.
Towns in eastern Ukraine on Monday braced for military action from government forces as a deadline passed for pro-Russian separatists to disarm and end their occupation of state buildings or face a major "anti-terrorist" operation.
The United States and the European Union considered tougher sanctions against Russia, a key exporter of crude oil to Europe and Asia, if separatist action continues.
Brent crude rose 80 cents to $108.13 by 0808 GMT, after gaining 0.6 percent last week. U.S. oil climbed 70 cents to $104.44 after settling 34 cents up in the previous session.
"It can create some anxiety, as the only answer (to Russia) from the UN or NATO is more sanctions," said Olivier Jakob, analyst at Petromatrix in Zug, Switzerland.
"It's not de-escalating so it's not surprising to see some risk positions being taken."
Russia has massed 35,000-40,000 troops near the Ukrainian border in addition to the 25,000 troops it recently moved into Crimea, Lyall Grant, Britain's U.N. ambassador said.
As the crisis worsens, the United States may step up sanctions, likely targeting Russians close to President Vladimir Putin as well as Russian entities.
However, they will not necessarily target entire Russian business sectors such as mining, banking and energy. Separately, EU foreign ministers will meet on Monday to discuss how to toughen sanctions against Russia.
Worries about supply disruption from Africa's largest oil producer also surfaced as a blast at a bus depot on the outskirts of the Nigerian capital Abuja killed at least 20 people during rush hour on Monday morning, witnesses said.
Yet further gains may be limited due to ample supplies and a weak demand outlook.
The tensions overshadowed expectations of more Libyan crude coming into the market and potentially weighing on Brent prices amid a weak demand outlook from top consumer China.
Libya's western Zawiya oil port has resumed operations after protesters vacated the entrance to the facilities and the adjoining refinery will restart in about 24 hours, a spokesman for the state oil company said.
Further gains in prices are also limited as investors await fresh data from the world's second-biggest consumer China.
A Reuters poll showed growth slowed to 7.3 percent in the first quarter from 7.7 percent in the final three months of 2013. This would be the slowest pace of growth in five years and near the minimum level needed to ensure stable employment.
(Additional reporting by Keith Wallace in Singapore; editing by Keiron Henderson)