UPDATE 2-Brent slips below $110 but Ukraine worries support

* Brent, U.S. crude hold near 2-1/2 wk highs

* Total U.S. inventories rise as Cushing stocks drop -EIA

* Libya's El Feel oilfield resumes production

* OPEC could cut production to make room for Iran -Iran oil minister

(Adds Iran oil minister comment, updates prices)

SINGAPORE May 15 (Reuters) - Brent crude slipped below $110 a barrel on Thursday, but stayed near its highest in two and half weeks as concerns over the crisis in Ukraine outweighed mixed U.S. oil inventory data.

The exclusion of pro-Moscow separatists from talks among Ukraine's interim leaders on plans to give the eastern regions greater autonomy ahead of presidential elections cast doubt over whether the move could defuse the political crisis.

Energy ministers from Russia and the European Union are also due to meet in Berlin on May 19 to agree a schedule for another round of talks with Ukraine to end a dispute over gas prices and supplies and avoid a potential "gas war".

"Geopolitical fears are a key factor at least for Brent. Given the environment, you are not yet going to see a declaration of peace," said Michael McCarthy, chief market strategist for CMC Markets in Sydney.

There was potential for supply disruptions just as energy demand increased in the northern summer, he said. Half of Europe's imports of Russian natural gas go through Ukraine.

Brent crude for June delivery had dropped 27 cents to $109.92 a barrel by 0701 GMT, down from $110.19 in the previous session - the highest settlement since April 24. The June contract expires on Thursday.

U.S. oil was down 32 cents at $102.05 a barrel after closing 67 cents higher at $102.37 - its highest finish since April 21.

Brent could rise to $115-118 a barrel by the end of next week, while U.S. crude could climb to $106 a barrel, McCarthy said.


Prices were driven higher in the previous session after weekly data from the government's Energy Information Administration showed stocks at the key Cushing, Oklahoma, delivery hub fell by 592,000 barrels in the week to May 9.

But Asian investors are instead looking at the overall build in U.S. crude inventories, causing oil prices to fall in trading on Thursday, said Jonathan Barratt, chief executive of commodity research firm Barratt Bulletin in Sydney.

U.S. crude inventories rose 947,000 barrels to 398.5 million barrels last week, as production hit a 28-year high of 8.43 million barrels, the EIA said on Wednesday.

Analysts had expected U.S. crude inventories to fall by 100,000 barrels.

"There are more reasons to sell rather than to see U.S. oil push up to $104-105. Inventory levels are at 25-year highs, Libya is coming on tap," Barratt said.

"Anything above $103.50 is expensive given the geopolitical risk and inventory levels."

U.S. crude is likely to remain range-bound up to $103 per barrel while Brent's upper limit was $111 per barrel in the next week, he said.

Production at Libya's El Feel oilfield has restarted the National Oil Corp (NOC) said on Wednesday, but supply from the 340,000 barrel per day El Sharara oilfield was still halted because protesters had yet to open the pipeline to Zawiya port.

Meanwhile, Iran and six world powers started three days of talks in Vienna on Wednesday aimed at drafting an agreement for Tehran to curb its controversial nuclear program in exchange for a phased end to the crippling sanctions that have cut its oil exports in half over the last two years.

OPEC countries could reduce their own oil output to make room for production from Iran's oilfields, Iran's oil minister said on Wednesday.

The current price for crude was fair, he said. 1/8ID:nL6N0O11BW 3/4

(Editing by Tom Hogue and Joseph Radford)