UPDATE 8-Oil higher on Ukraine tensions, data, but posts second monthly fall
* Tensions mount over alleged Russian troops in Ukraine
* U.S. consumer confidence, Midwest factory activity high
* Ample supply, softening demand drag on prices
* OPEC output rises in Aug from July - survey (Updates with CFTC data)
NEW YORK, Aug 29 (Reuters) - Crude oil prices posted their second straight monthly losses, despite rising on Friday on worries that the intensifying Ukraine crisis may trigger more sanctions and as U.S. economic data portended strong demand in the world's largest oil consumer.
U.S. crude oil rose for a fourth straight session after data showed consumer confidence rose in August to a seven-year high, although consumer spending dipped 0.1 percent.
The Institute for Supply Management-Chicago said its business barometer shot up to 64.3 this month from 52.6 in July. It was the index's biggest monthly point gain since July 1983 and pointed to continued strength in the manufacturing sector
"The strong data in Chicago manufacturing is making people think that there could be something going on that will show up in demand numbers shortly," said Phil Flynn, an analyst at Price Futures Group in Chicago, Illinois.
Brent crude oil rose after the government in Kiev said Russian troops had entered Ukraine in support of pro-Moscow rebels, intensifying a separatist war and prompting alarm among Kiev's Western allies, as well as fears of new sanctions that could target Russia's energy sector.
Russia is Europe's biggest supplier of oil, coal and natural gas, meeting around a third of demand for all those fuels, according to EU data. It receives in return some $250 billion a year, or around two-thirds of government revenue.
Brent for October delivery rose 73 cents to settle at $103.19 a barrel, while U.S. crude gained $1.41 to $95.96 a barrel.
U.S. crude's discount to Brent CL-LCO1=R narrowed to $7.23 a barrel, having touched $7.19, the smallest amount in two weeks and nearly $2 narrower than Thursday's $9.15.
Both benchmarks pushed higher toward the end of the trading session, ahead of a long holiday Labor Day weekend in the United States.
The October contract's premium to September CLc1-CLc2 fell as low as 43 cents intraday on Thursday, reacting to a fire at BP's 413,500-barrel-per-day Whiting, Indiana, refinery, but had increased to as much as 96 cents intraday on Friday.
"It's war premium, because if you're trading do you want to trade on a refinery problem that may last a few weeks or the possibility of war?" said a New York-based futures broker.
Even after Friday's increases, oil prices on both sides of the Atlantic registered their second straight month of losses with Brent down 2.8 percent and U.S. crude falling 2.3 percent in August.
The European benchmark oil contract had plunged more than 12 percent from a nine-month high in June to a 14-month low last week as weak demand led to an oil supply glut.
Analysts said a suspension of Russian oil exports remained improbable despite the crisis.
West African crude exports to Asia were near record levels in September, a Reuters survey of traders showed, and the North Sea market remained well supplied.
Production from the Organization of the Petroleum Exporting Countries (OPEC) rose despite conflicts in Iraq and Libya.
OPEC, which supplies a third of the world's oil, raised its output in August from July, with higher supply from Libya, Angola and Iran, a Reuters survey found.
Money managers and large hedge fund speculators cut their net long U.S. crude combined futures and options position in New York and London by 6,250 contracts to 195,684 in the week to August 26, data from the U.S. Commodity Futures Trading Commission (CFTC) showed on Friday. (Additional reporting by Robert Gibbons in New York, Henning Gloystein and David Sheppard in London, Florence Tan in Singapore; Editing by Jane Baird, Keiron Henderson, Dale Hudson, Marguerita Choy and Jonathan Oatis)