UPDATE 8-Oil falls in low volume as Libyan rebels gain ground

                                
 * US oil trading on track for lowest volume day of 2011
                                
 * Libyan rebels regain control of some oil facilities
                                
 * Qatar first Arab nation to recognize Libya rebels
 (Recasts, updates prices, market activity)
                                
 By Joshua Schneyer
                                
 NEW YORK, March 28 (Reuters) - U.S. crude fell on Monday
for a third day in the lowest trading volume of the year, as
Libyan rebels regained key territory and redoubled efforts to
resume oil exports from the OPEC country.
                                
 Oil seesawed during the day on a weakening U.S. dollar
<.DXY> , upbeat U.S. pending home sales data, and growing
speculation that the European Central Bank will raise interest
rates as early as next month, which helped bolster the euro.
                                
 Brent crude futures for May delivery <LCOc1> settled down
79 cents at $114.80 a barrel. U.S. May crude futures <CLc1>
fell for a third day, losing $1.42 to $103.98.
                                
 Brent's premium to the U.S. benchmark <CL-LCO1=R> increased
by 40 cents to $10.82 a barrel, within a recently established
range, after narrowing from a March 1 record above $17.
                                
 The most notable aspect of oil trade was its low volume,
with uncertainty running high due to Middle East unrest, a
nuclear crisis in quake-hit Japan, unsure economic prospects
for the euro zone, and U.S. Federal Reserve officials debating
quantitative easing policies.
                                
 Total U.S. crude volume was 58 percent below the 30-day
average. At 348,370 lots traded by the end of regular NYMEX
market hours, volume was on pace to be the lowest since Dec.
31, according to Reuters data. Brent trading volume was 48
percent below the 30-day average.
                                
 "The low trading volumes have continued from last week with
a high level of indecision in oil markets," said John Kilduff
of New York hedge fund Again Capital.
                                
 "Uncertainty about supplies from the Middle East is
counterbalanced with the potential for demand destruction in
Japan following the earthquake. The big momentum players are
getting sidelined."
                                
 LIBYAN REBELS GAIN
                                
 In OPEC producer Libya, rebels backed by Western air
strikes advanced their position over the weekend, regaining
control of key oil ports. [ID:nLDE72R009]
                                
 That could help slowly revive exports from the North
African oil producer, whose oil shipments have been slashed to
a fraction of their usual 1.5 million barrels a day.
                                
 A U.S. Treasury official said rebels could sell Libyan
crude free from sanctions imposed against transactions with the
government of Colonel Muammar Gaddafi.
                                
 Middle East Gulf country Qatar, which has backed the Libyan
rebels, agreed to help sell the Libyan crude.
                                
 Rebel leaders, oil traders and analysts said the
developments raised the possibility of more oil exports, but
warned they did not expect quick resumption of large volumes.
                                
 Ongoing fighting and concerns over U.S. and United Nations
sanctions are likely to keep crimping Libya's output, they
said. [ID:nLDE72R1X7]
                                
 "Qatar's help and rebel gains in theory could quicken
Libya's efforts to resume oil shipments, but there are still a
lot of logistics problems," said Matt Smith of Summit Energy in
Louisville, Kentucky..
                                
 "A lot of the workers that operate Libya's oil industry
have left."
                                
 The United Arab Emirates said it has "stepped in" to help
make up for lost output from Libya, and acknowledged that other
OPEC producers have done the same by unilaterally boosting
output, including Saudi Arabia, Kuwait and Angola.
[ID:nLDE72R248]
                                
 The U.S. National Association of Realtors said its Pending
Home Sales Index, based on contracts signed in February,
unexpectedly rose 2.1 percent, potentially boosting the outlook
a U.S. economic recovery.[ID:nWALSEE73Y]
                                
 But Japan's woes and Europe's murky economic outlook have
dampened bullishness about growth in oil demand.
                                
 "Europe remains a concern with Portugal, Ireland and Greece
all contributing to a negative economic picture," Smith said.
                                
 Meanwhile, U.S. Federal Reserve officials are sending
differing signals about whether the central bank should
continue quantitative easing as U.S. consumer prices edge
higher.
                                
 Atlanta Fed President Dennis Lockhart said the easing
policy is "appropriately calibrated" to the state of the U.S.
economy. Over the weekend, St. Louis Fed President James
Bullard said policymakers should consider discontinuing
quantitiative easing. [ID:nN28205680]
 (Additional reporting by Robert Gibbons in New York, Claire
Milhench in London and Alejandro Barbajosa in Singapore;
Editing by Marguerita Choy and David Gregorio)