Brent holds above $109 as China data meets forecast, Ukraine supports
* Ukraine president calls for anti-rebel offensive as peace deal falters
* China manufacturing activity shows easing pace of decline -HSBC PMI
* U.S. crude inventory rises slower than expected -API
* Libya oil output 220,000 bpd, several fields still closed -NOC
By Manash Goswami
SINGAPORE, April 23 (Reuters) - Brent futures held above $109 a barrel on Wednesday with the global demand growth outlook largely unchanged after a Chinese manufacturing survey showed an easing pace of decline, while the unfolding Ukraine crisis kept any losses in check.
A downturn in factory activity in the world's second-biggest oil consumer was expected - the fourth straight month of contraction - but analysts also saw initial signs of stability due to government efforts to underpin growth.
Ukraine's acting president, Oleksander Turchinov, called for government forces to relaunch an offensive against pro-Russian rebels, raising new questions on the success of last week's peace deal.
Brent crude fell 7 cents to $109.20 at 0403 GMT, after ending 68 cents or 0.6 percent lower in its biggest drop in two weeks.
U.S. oil fell 22 cents to $101.54, after losing more than 2 percent in its steepest decline in nearly four months. The May contract expired, making the June contract the new front month. Both May and June contracts fell by more than 2 percent.
"China is slowing down and that's a concern, but people don't expect it to fall off a cliff," said Tony Nunan, an oil risk manager at Mitsubishi Corp.
"Geopolitical concerns over Ukraine, unfinished issues such as Syria and Libya, are keeping prices supported."
Going by fundamentals and without the current risk premium on oil, Brent should be closer to $100 a barrel with the U.S. benchmark around $90, Nunan said.
"People expect nothing is going to happen over Ukraine, but there is that 'but'," Nunan said.
Oil is also drawing support on expectations stockpiles in the world's top consumer the United States rose slower than expected last week. Crude inventories rose by 519,000 barrels in the week ended April 18, data from industry group the American Petroleum Institute showed, compared with analysts' expectations for a increase of 2.3 million barrels.
Gasoline stocks fell by 3.4 million barrels versus a 1.7-million-barrel decline forecast, indicating healthy demand as summer driving season gets underway.
Investors are now awaiting data later in the day from the Energy Information Administration (EIA) to get a clearer picture on the country's demand outlook.
U.S. crude oil stocks have surged 43 million barrels since mid-January and jumped 10 million barrels in the week to April 11, well beyond expectations. Stocks on the Gulf Coast that week hit a record high due to a rise in imports and as domestic output hit its highest in 26 years, EIA's previous data showed.
"On the supply side, the big story continues to be U.S. tight oil," Nunan said. "Gasoline demand is rising, so that's balancing things out a bit. But, overall oil markets are oversupplied."
Investors are also keeping an eye on Libya's progress in ramping up exports. The North African nation's oil production is currently around 220,000 barrels a day as several western oilfields remain closed due to protests, a spokesman for state-run National Oil Corp (NOC) said.
The El Sharara, El Feel fields and oil condensates production at the Wafa field were still shut down. Libya's oil production was 1.4 million bpd until July when a wave of protests at oilfields and ports started across the North African country.
Additional support, particularly for the U.S. benchmark, is also coming from U.S. housing data. While home resales fell to their lowest level in more than 1-1/2 years in March, there were signs a recent downward trend may be drawing to an end.
There was also an increase in supply and more first-time buyers entered the market, adding to growing evidence of a broad based recovery in the world's biggest economy. (Editing by Tom Hogue)