* Iraq city of Mosul falls to militants
* OPEC sets 30 mln bpd output target for second half of 2014
* U.S. EIA data shows crude stocks down (Adds spread)
By Lorenzo Ligato
NEW YORK, June 11 (Reuters) - Brent oil futures climbed toward $110 a barrel on Wednesday as violence in Iraq prompted worries about the supply outlook, while U.S. crude struggled to make gains near key levels of resistance.
Militants from an al Qaeda splinter group who seized Iraq's second-biggest city, Mosul, earlier this week have advanced into the oil refinery town of Baiji, raising concerns about oil supply interruptions should other regions in the country fall.
U.S. crude gained slight support from a weekly government report showing a fall in crude oil and gasoline stocks, but overall strong production in the country weighed on sentiment.
"In the context of the risks to Baghdad, then U.S. oil production starts to look downright timely, otherwise oil prices could go much higher," said Richard Hastings, macro strategist at Global Hunter Securities.
Brent futures gained 43 cents to settle at $109.95, having earlier hit a high of $110.25.
U.S. oil gained 5 cents to settle at $104.40 a barrel, after swinging between $104.17 and $104.81. It had risen to an intraday high of $105.06 on Tuesday, inching close to this year's peak of $105.22 in early March.
Key resistance levels around $105 a barrel for U.S. crude and $110 for Brent capped gains, traders said.
The spread CL-LCO1=R between the two benchmarks closed at $5.55. It had narrowed to $5.17 on Tuesday, its lowest point since April 15.
In Iraq, oil Minister Abdul Kareem Luaibi said key southern oilfield export facilities were "very, very safe", with shipments running at around 2.6 million barrels per day (bpd).
Although the fighting is not close to oil-producing areas, it has prompted fears that the situation could deteriorate and hit production.
"It warrants support of the oil price. We already have Libya out, Iran's exports are low, and there is no prospect of an immediate return for either of them," said Bjarne Schieldrop, an analyst at SEB in Oslo.
Libya is aiming for an oil output target of 800,000-900,000 bpd if its output is restored soon, the country's oil minister, Omar Shakmak, said. Protests have lowered oil exports from Libyan ports to nearly zero.
In the United States, crude inventories fell 2.6 million barrels in the week ended June 6, data from the U.S. Energy Information Administration showed on Wednesday.
The fall in crude oil stockpiles, which exceeded forecasts for a 1.9-million-barrel drop from analysts polled by Reuters, was accompanied by slow imports and lower refinery utilization rates.
OPEC, which pumps more than a third of the world's oil, agreed on Wednesday to renew for the second half of 2014 its oil production ceiling of 30 million barrels a day in a widely anticipated decision based on its thinking that current oil prices are fair. (Additional reporting by Simon Falush in London and Manash Goswami in Singapore; Editing by Peter Galloway, Alden Bentley and Andrew Hay)