UPDATE 7-Oil rebounds as dollar weakens

* Restarting Libyan oilfields put brake on rally

* Saudi comments, global growth offer some support (Updates with price activity, changes dateline, previously LONDON.)

NEW YORK, Jan 22 (Reuters) - Oil rose on Monday as the dollar weakened, prompting investors to turn to dollar-based commodities, and to shrug off concerns that a rally that had sent prices to their highest since December 2014 had run out of steam.

Oil bounced back after retreating early in the session, with U.S. West Texas Intermediate crude testing lows just above $63 a barrel before changing course.

"Dollar-selling generated buying in dollar-based commodities," said John Kilduff at Again Capital in New York. "That trade has been out of vogue a bit, but we're reaching a level now where that is going to start to kick in."

Brent crude was up 50 cents to $69.11 a barrel by 12:00 p.m. EST 1/81700 GMT 3/8, reversing after retreating to a session low of $68.39. Brent on Jan. 15 had hit $70.37, the highest since December 2014.

U.S. crude rose 35 cents to $63.72, having also hit its highest since December 2014 last week.

The dollar index, which measures the greenback against six rival currencies, was down 0.16 percent at 90.428, close to a three-year low, as the U.S. government shutdown weighed on sentiment.

Earlier in the day, resumption of output from Libya's As-Sarah fields weighed on the market.

"The downside might be limited but last week's highs are unlikely to be penetrated unless there is a significant bullish change on the supply front," PVM analyst Tamas Varga said in a report.

Production at As-Sarah resumed on Sunday and was expected to add 55,000 barrels per day by Monday.

Brent is particularly sensitive to changes in output from Libya, as most Libyan crude is priced against Brent.

The strength in oil followed comments from top exporter Saudi Arabia that the Organization of the Petroleum Exporting Countries and other producers would continue to cooperate on oil output cuts beyond 2018. The deal began in January 2017.

Saudi Energy Minister Khalid al-Falih said market rebalancing might not occur until 2019, suggesting it would take longer than OPEC had previously indicated.

Global economic growth was also helping prices by driving up demand. "Global growth has become synchronised and accelerated above trend," U.S. bank Morgan Stanley said in a note.

(Additional reporting Ahmad Ghaddar, Julia Payne and Alex Lawler in London and Henning Gloystein in Singapore; Editing by Marguerita Choy and Edmund Blair)