* Frigid weather shuts units at U.S. and Canadian refineries
* Libya armed forces warn oil tankers away from seized ports
* U.S. crude inventories expected to rise in weekly reports (Adds API data released late Tuesday)
By Elizabeth Dilts
NEW YORK, Jan 7 Oil rose on Tuesday as frigid weather in North America hurt some refinery operations and worries grew over Libyan output and fighting in Iraq.
At least five refineries in the U.S. and Canada curtailed supply after bitterly cold temperatures caused malfunctions and, in a few cases, full-scale closures.
"The refineries shutting down is the story of the day," said Joseph Posillico, senior vice president at Jefferies Bache in New York.
Brent crude settled at $107.35, 62 cents higher than Monday, after settling lower in the previous five sessions, partly aided by a stronger dollar and higher equity markets. U.S. crude settled at $93.67, up just over a quarter of a percent.
U.S. RBOB gasoline futures rose 3.45 cents to $2.6805 a gallon.
Crude inventories fell by 7.3 million barrels last week, the American Petroleum Institute announced Tuesday.
Libya continues to present long term concerns, after the Libyan navy opened fire on a tanker that approached to load crude at the seized port of Es Sider. That port, along with several others has been controlled for several months by protesters demanding more autonomy from Tripoli.
A group representing the protesters said in a televised announcement late Tuesday that global oil companies are welcome to buy oil at this and other ports, and they will insure the safety of the tankers.
Analysts were pessimistic about the prospect of a further output recovery after the restart of the major El Sharara oilfield had led to a drop in prices.
"The market is taking it with a grain of salt that (Libya) can come through this time," said Gene McGillian, an energy analyst with Tradition Energy in Stamford, Connecticut.
Production is building up at the 340,000-barrel-per-day (bpd) El Sharara, which on Tuesday is pumping 277,000 bpd. A return to full output will more than double Libyan production, which had fallen to 250,000 bpd from 1.4 million bpd in July.
Marathon Petroleum Corp said its 120,000-bpd Detroit refinery was experiencing technical difficulties Tuesday because of the extreme cold. And industry group Genscape reported reduced activity at the gasoline-making fluid catalytic cracker of Marathon's 212,000 bpd Catlettsburg, Kentucky refinery.
PBF Energy Inc said it shutdown most processing units at its 160,000 barrel-per-day (bpd) refinery in Paulsboro, New Jersey, after a loss of steam.
The North Atlantic Come By Chance Refinery in Newfoundland, Canada, also remained offline because of a local outage, local media reported. And weather conditions in southern Ontario prompted Shell Canada to shut one unit at its 75,000-bpd Sarnia refinery for minor repairs.
The glitches were partly offset by expectations of significantly reduced demand for transport fuels.
"The cold weather isn't helping crude oil trade higher than people would think because there are so many cancellations with flights," Baruch said.
Temperatures were forecast to return to normal levels in Texas and North Dakota by Wednesday leading analysts to believe the interruptions will be brief.
"I haven't seen anything that's going to cause a huge issue for them coming back online," Posillico said.
VIOLENCE IN IRAQ
Violence in Iraq and the possibility of increased tensions ahead of parliamentary elections in April have also sparked concern about supply from one of the Middle East's largest oil producers.
The Iraqi army deployed tanks and artillery around Falluja on Tuesday, security officials said, as local leaders in the besieged city urged al Qaeda-linked militants to leave in order to avert an impending military assault. (Additional reporting by Alex Lawler in London and Jacob Gronholt-Pedersen in Singapore; Editing by William Hardy, David Gregorio, Paul Simao and Andrew Hay)