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Brent climbs above $108 as Libya output drops

* Libyan crude oil exports fall to lowest level in six weeks

* U.S. industrial output posts largest gain in 7 months

* Market eyes talks between Iran and world powers

By Ron Bousso

LONDON, Oct 28 (Reuters) - Brent crude rose above $108 a barrel on Monday after a new drop in Libya's oil exports revived supply concerns while strong gains in U.S. industrial output boosted demand hopes.

Brent for December delivery was up $1.39 at $108.32 a barrel by 1412 GMT, ending three days of losses. U.S. crude was up 13 cents at $97.98 a barrel.

"The key driver today for Brent is Libya. The fact that U.S. industrial output did pick up is supportive of crude," said Amrita Sen, chief analyst at consultants Energy Aspects.

Libya's crude oil exports have fallen to the lowest level in six weeks after operations at its western port of Zawia were suspended at the weekend.

Libya's exports are now less than 250,000 barrels per day (bpd), according to Reuters calculations, compared with a capacity of more than 1.2 million bpd.

"When there is less Libyan crude available it puts pressure on Brent, which are of similar light sweet grades," said Christopher Bellew, oil trader at Jefferies Bache.

Crude output from the Organization of the Petroleum Exporting Countries (OPEC) member partly resumed in September following weeks of unrest in the north African country as some oilfields in the east remain shut.

U.S. industrial production recorded its largest increase in seven months in September as utilities output surged after several months of declines, boosting hopes for increased demand in the world's top oil consumer.

Brent fell 2.7 percent last week, the biggest weekly drop in a month, as concern about higher supply and faltering demand offset signs of faster economic growth in China.


Investors are also keeping an eye on a two-day meeting of experts from Iran and six world powers on Wednesday.

Western diplomats say the meeting, scheduled to take place a week before the next round of negotiations in Geneva in November, could be instrumental in defining the outlines of any preliminary agreement on Iran's uranium enrichment campaign.

U.S. and European sanctions against Iran over its disputed nuclear programme have cut oil exports from the OPEC member by more than half, underpinning global oil prices.

Iran has not halted its most sensitive uranium enrichment work, a senior Iranian parliamentarian said on Saturday, contradicting a statement by another lawmaker last week.