* Cold weather hits U.S. factory output, boost heating
* Dollar at six-week lows, supporting commodities
* Libya's oil output falls to 390,000 bpd due to protests
* U.S. markets closed for Presidents' Day, limiting volume
(Updates prices; paragraph 4)
By Christopher Johnson
LONDON, Feb 17 Brent crude oil steadied around
$109 a barrel on Monday, supported by a weak dollar, supply
disruptions and a severe winter across North America that has
boosted heating demand.
Speculators and hedge funds have sharply increased bullish
bets on crude oil to near their highest ever, U.S. market data
showed, with prices driven higher by a jump in demand for U.S.
The dollar languished at a six-week low against a basket of
major currencies, supporting commodities such as oil that
are priced in the currency.
Brent crude oil fell 10 cents to $108.98 a barrel
1515 GMT, having reached an earlier high of $109.40. U.S. oil
gained 50 cents to $100.80.
"The U.S. winter and weak dollar are both supporting the
market," said Carsten Fritsch, senior analyst at Commerzbank.
"But there is a chance of a sharp correction. The risk is
limited as long as the U.S. weather stays cold. But when it gets
warmer, prices could come down sharply."
Economic data are also a risk for oil.
Disappointing U.S. figures on Friday revived worries about
demand from the world's top oil consumer.
U.S. manufacturing output unexpectedly fell in January,
recording its biggest drop in more than 4-1/2 years, in the
latest indication the economy got off to a weak start this year.
Part of the explanation was probably the severe winter
weather, but some economists are concerned that recovery may be
stalling, which would curb demand for fuel.
The next set of significant data is the HSBC flash PMI
survey of manufacturers for February, due on Thursday.
U.S. crude oil, also known as West Texas Intermediate or
WTI, has risen steadily over the last six weeks and is now close
to the top of its range over the last four months.
Strategists say further gains in U.S. crude futures may be
limited as refineries take plants down for maintenance.
"We expect the upward momentum in WTI to slow down if it
crosses the $101 a barrel level again, partly from the weight of
softening U.S. Gulf Coast balances," Barclays analysts said.
"Refinery maintenance in the Gulf Coast is expected to peak at
the start of March, and runs have already started to slow down."
Oil also found support from Chinese data showing banks
disbursed the highest volume of loans in any month in four years
in January, a surge that suggests the world's No.2 economy may
not be cooling as much as some fear.
Supply disruption fears continued to keep a floor under
prices. Libya's oil production has dropped to 390,000 barrels
per day (bpd) as protests have partly blocked flows from the El
Sharara oilfield, the state National Oil Corp said.
Protesters led by a former anti-Gaddafi rebel have seized
three oil ports in eastern Libya since August, cutting off
around 600,000 bpd of export capacity, to demand more regional
autonomy and a greater share of oil wealth.
(Additional reporting by Manash Goswami in Singapore; editing
by Jason Neely)