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UPDATE 6-Oil rises towards $110 on Ukraine, supply concerns

* Obama says more sanctions "teed up" against Russia

* U.S. crude oil inventories rise to highest on record

* Focus on Brent support at $109.00, 200-day moving average

* Output at key North Sea field cut, Libyan supply mostly offline

(Updates prices)

LONDON, April 24 (Reuters) - Oil rose towards $110 a barrel on Thursday as the dispute between Russia and the West over Ukraine added to supply concerns, although record U.S. crude inventories kept gains in check.

Ukrainian forces killed up to five pro-Moscow separatists in the east of the country, the Interior Ministry said on Thursday, as Russian President Vladimir Putin warned of "consequences" if Kiev used the army against its own people.

Global benchmark Brent crude was up 84 cents at $109.95 by 1333 GMT, after settling 16 cents lower on Wednesday. U.S. crude rose 65 cents to $102.09.

"The escalating Ukraine conflict is fuelling fears about supply outages," said Carsten Fritsch, commodities analyst at Commerzbank in Frankfurt.

A rise in crude oil stockpiles in the United States to the highest since records began in 1982, as reported in government data on Wednesday, kept a lid on prices. Brent has still gained almost 6 percent from a five-month low of $103.95 on April 2.

A further escalation over Ukraine could lead to damaging economic sanctions, raising the risk of a disruption in Russian gas supplies on which Europe depends. Russia is also one of the world's top oil producers.

U.S. President Barack Obama said more sanctions were "teed up" against Russia if it fails to deliver on promises made in an agreement in Geneva last week to ease tensions in Ukraine. Russia suggested foreign firms which pull out of the country may not be able to get back in.

"The immediate demand-supply dynamic is negative, but Ukraine is the wild card that is stopping the market from declining further," said Ric Spooner, chief analyst at CMC Markets.

"For the near term, I see markets largely neutral, trading in a range with a downward bias."

On the charts, a key technical support level for Brent is the 200-day moving average at $109.00, while a strong test for the upside is resistance at $110.00, said Olivier Jakob, oil analyst at Petromatrix.

Disruption to output in Libya, and a supply cutback at the largest British North Sea oilfield, also supported Brent.

Libya's production was around 220,000 barrels per day (bpd) on Tuesday, a sign that an April 6 agreement between rebels and the government to reopen occupied ports has yet to result in any significant output recovery.

Supply has been cut at the North Sea Buzzard oilfield by about 50,000 bpd, a trade source said on Wednesday. The 200,000-bpd field is the biggest contributor to Forties, one of the four crude streams underpinning Brent.

The field's operator, Nexen, confirmed on Thursday output had fallen due to maintenance work.

(Additional reporting by Manash Goswami in Singapore; Editing by Dale Hudson and David Evans)