UPDATE 3-Oil slips, still near 7-week high on Ukraine crisis

* Ukraine forces kill up to 5 rebels

* Libya rebels say oil ports to stay shut unless govt action

* Brent set for 3rd week of gains, longest since September

* Surplus global oil output capacity rises - EIA

(Updates throughout, changes dateline, previous SINGAPORE)

LONDON, April 25 (Reuters) - Brent crude oil eased below $110 a barrel on Friday but was still near seven-week highs as escalating tensions over Ukraine between major oil producer Russia and the West heightened fears of supply disruption.

Ukraine said on Friday it was pressing on with an operation against pro-Russian rebels in the east of the country and had ample military resources to keep up the offensive round the clock.

Ukrainian forces killed as many as five pro-Moscow rebels on Thursday in the first use of lethal force to recapture territory from the fighters, while the United States accused Russia of trying to destabilise the region.

Oil came under some pressure from a U.S. government report showing the amount of crude oil that producers can quickly bring on line had risen.

Brent crude oil, set to post a third week of gains in its longest such streak since September, eased 35 cents to $109.98 a barrel by 0745 GMT, after settling up $1.22.

U.S. oil slipped 30 cents to $101.64.

"The escalation of the situation in eastern Ukraine is raising the risk that oil and gas supplies could be affected at some point," said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt.

"If the standoff intensifies, energy supplies could be hit either by sanctions or by incidents such as pipeline blockages or even attacks on oil or gas facilities."

A report by the U.S. government's Energy Information Administration on Thursday showed, however, that the global surplus of oil production capacity had risen 200,000 barrels per day over the last two months.

"That is some extra cushion for the market in case there is a supply disruption," Fritsch said.

U.S. Secretary of State John Kerry has suggested the United States may impose more sanctions on Russia, saying time was running out for a change in course. Moscow has demanded the United States force Ukrainian authorities to halt the military operation.

News from Libya was also supportive for oil, with reports its oil ports may stay shut longer than expected.

A rebel group in the country's east that controls several ports said on Thursday it would not reopen the Ras Lanuf and Es Sider terminals unless the government implemented its part of a deal to end the oil blockade.

"They have been in talks, but the ground reality is that there has been no pick-up in exports from Libya," a trader with a Western trading house said. "Nobody expected it to be quick, but hopes of a smooth ramp-up in exports are fading."

(Additional reporting by Manash Goswami in Singapore; Editing by Jane Baird)