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Oil rises as optimism over Libyan supply gets doused

Global oil prices rose on Friday as investors worried about Libya after a recovery in the OPEC country's oil supply proved short-lived and government forces clashed with Islamist militias.

Libya's El Feel oilfield was shut again by protests and the El Sharara field remained closed, bringing national oil output down to about 200,000 barrels per day (bpd) - far from the 1.4 million bpd pumped last year. The government had pledged to bring western oilfields and pipelines back online after it reached a deal with protesters, and output had clawed back to around 300,000 bpd.

In the east of the country, Libyan irregular forces clashed with Islamist militias in Benghazi, killing at least four people.

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Brent crude rose 60 cents to above $109 a barrel. U.S. crude rose 50 cents to settle at $102.02, a few cents from its highest close since late April.

A dispute between Russia and Ukraine over payment for natural gas eased as Russia offered Ukraine a discount if it paid $2.2 billion of the $3.5 billion debt Moscow says Kiev owes for natural gas supplies. Meanwhile, U.S. Secretary of State John Kerry warned Russia it faced broader economic and industrial sanctions from the United States and Europe if it meddles in Ukraine's presidential elections on May 25.

U.S. economic data offered contrasting pictures for growth in the world's largest oil consumer. A monthly gauge of U.S. consumer sentiment fell in May as a gloomy view on income growth clouded an otherwise positive economic outlook, a preliminary reading of the Thomson Reuters/University of Michigan's survey showed.

Earlier, data showed U.S. housing starts jumped in April and building permits hit their highest level in nearly six years, offering hope that the troubled housing market could be stabilizing.