* Brent, U.S. oil hold steady near two-week highs
* Ukrainian soldiers killed, wounded in ambush in east
* U.S. crude stocks fall in Cushing but rise overall
* Libya's western El Feel oilfield resumes output -NOC
* Protesters still stop restart of Libya's Sharara oilfield
(Rewrites top, updates prices, adds analyst commentary, changes byline, dateline, previous LONDON)
NEW YORK, May 14 (Reuters) - Brent futures rose $1 a barrel on Wednesday while U.S. crude rose 75 cents with both on track to settle near three-week highs supported by a draw on stocks in the United States and the deteriorating situation in Ukraine.
Kiev's interim leaders proposed a plan to allow regions a greater say in government one day after the deadliest attack on Ukraine's security forces yet in which seven soldiers died near the city of Kramatorsk.
Brent crude for June delivery rose $1.02 to $110.26 a barrel at 12:38 p.m. EDT (1638 GMT), extending a second day of gains on its last day before it expires on Thursday.
U.S. oil was up 75 cents at $102.45 a barrel after finishing $1.11 higher in the previous session at its highest settlement since April 24.
U.S. crude stocks rose overall last week but inventories fell by 592,000 barrels at the Cushing, Oklahoma, delivery point of the U.S. oil futures contract, data from the U.S. Energy Information Administration showed on Wednesday.
Gasoline inventories also fell by 772,000 barrels and distillates fell 1.1 million barrels as refineries cut output and many went down for maintenance before the start of the summer driving season in two weeks.
New York gasoline prices rose more than 3 cents to $2.9631 a gallon on the report.
"We saw strong gasoline demand data in the report this morning, which combined nicely with the reduced oil stocks at Cushing to encourage futures prices higher," said Richard Hastings, a macro strategist at Global Hunter Securities.
On the bearish side, U.S. Gulf coast crude oil stocks rose to a record high, the EIA said.
"Prices are still more influenced by Cushing than by the Gulf Coast due to the Cushing spot price market," Hastings said. "If we see better demand signals for gasoline then Gulf Coast oil stocks probably won't spin out of control."
Traders have also been eyeing Libya, where state officials and rebel leaders have gone back and forth on agreements to reopen several oilfields.
The El Feel oilfield, also known as Elephant, resumed production, Libya's state oil company said on Wednesday, after protesters agreed to end their blockade of the pipelines connecting that field to the port of Mellitah.
But the larger 340,000-barrel-per-day El Sharara oilfield was still closed as its pipeline to the Zawiya port remained blocked.
Also acting as a dampener for demand, data from China on Tuesday, including industrial output, retail sales and fixed asset investment, showed slower growth for April in the world's second-largest economy.
China consumed roughly 9.71 million bpd of oil last month, according to Reuters calculations based on preliminary government data, the lowest in seven months and down from 9.79 million bpd in March. Growth in China's oil demand has been slowing since mid-2013, the International Energy Agency said in an April report.
(Additional reporting by Julia Payne in London and Keith Wallis in Singapore; Editing by William Hardy and James Dalgleish)