U.S. Markets open in 3 hrs 43 mins

Brent crude edges lower as supply concerns ease

* Brent oil eases on Libya deal, Iraq pipeline

* Dollar dips after hitting three-year high

* Protests in Egypt stoke supply concerns

* U.S. crude hits 14-month high in the wake of jobs data (Updates to settlement; adds comment)

By Anna Louie Sussman

NEW YORK, July 8 (Reuters) - Brent crude oil fell on Monday as the announced returns of a Libyan oilfield and an Iraqi pipeline eased concerns about global oil supplies following an early rally to a three-month high above $108 a barrel because of continuing unrest in Egypt.

Libya's major Sharara oilfield will resume operations after an agreement was reached with the armed group that shut it down last month, a senior Libyan oil source said on Monday. On Sunday, Libyan officials said they reached an agreement with security guards who shut down two oil export terminals in the east of the country to demand better working conditions.

A pipeline from Iraq to the Turkish port of Ceyhan will resume operations in two to three days following an interruption caused by a leak, two sources in Iraq's state-run North Oil Company (NOC) said on Monday.

The drop comes after oil prices posted their biggest weekly gain in a year last Friday as tension in Egypt rattled markets and better-than-expected U.S. labor data sparked concern about the wind-down of the Federal Reserve's monetary stimulus.

"The Libyans did restart the export terminal so that lent itself to today's softer crude values and there definitely is profit-taking" following last week's gains, said Andy Lebow, vice-president at Jefferies Bache in New York.

Brent, the European benchmark, settled down 29 cents at $107.43 a barrel, after hitting $108.04 early in the session, its highest since April 4.

U.S. crude slipped 8 cents to settle at $103.14 after earlier touching a new 14-month high of $104.12.

The spread between the two benchmarks settled at $4.29, its narrowest close since January 2011, after earlier widening out to $4.76 and narrowing to $3.78 in a volatile day in spread trading.

"In spite of a slightly lower close, the crude markets are still receiving underlying support off of a need to maintain some geopolitical risk premium related to civil unrest in Egypt that has yet to acquire clarity," wrote Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, in a research note.

At least 51 people were killed in Cairo on Monday, medical sources said. Islamist protesters angered by the military overthrow of President Mohamed Mursi said they were fired on at the Cairo military barracks where he was being held.

Any conflict in the Middle East raises worries of disruption at major oil-producing areas or oil shipments.

So far, ports and shipping through the Suez Canal - through which a major portion of the world's oil is shipped - have been operating normally.

"It is Egypt's position as a major transit point for global crude oil movements that explains the current concern and geopolitical risk premium assigned to the goings on in that country," said a research note from Standard Bank. (Additional reporting by Peg Mackey in London and Jessica Jaganathan in Singapore; Editing by Chris Reese, Andre Grenon and Chizu Nomiyama)