* Armed protesters block 250,000 bpd of production in Libya
* OPEC-led production cut expected to be extended into H2
* China becomes No.3 overseas destination for U.S. crude - EIA (Updates throughout, changes dateline from SINGAPORE)
By Ahmad Ghaddar
LONDON, March 29 (Reuters) - Oil prices extended gains on Wednesday despite industry data showing an increase in U.S. crude inventories, lifted by supply disruptions in Libya and views that an OPEC-led output reduction is likely to be extended.
Front-month Brent crude futures LCOc1 rose 41 cents to $51.74 a barrel by 0929 GMT.
West Texas Intermediate (WTI) crude futures CLc1 were up 34 cents at $48.71 a barrel.
Oil production from the western Libyan fields of Sharara and Wafa has been blocked by armed protesters, reducing output by some 250,000 barrels per day (bpd) and prompting the National Oil Corp to declare force majeure on Tuesday. (Libya), along with the Iranian oil minister saying there is likely to be an extension to the production cut deal, helped crude oil rally overnight," said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
OPEC member Libya was excluded from the cuts, agreed late last year, as the country's oil sector fell victim to the unrest that followed the toppling of Muammar Gaddafi in 2011. Oil Minister Bijan Zanganeh said on Tuesday that the agreement between the Organization of the Petroleum Exporting Countries and other producers led by Russia to cut output by 1.8 million bpd in the first half of 2017 was likely to be extended. gained despite a rise last week in U.S. crude inventories.
U.S. crude stocks rose by 1.9 million barrels to 535.5 million barrels, while gasoline and distillate stocks declined, the American Petroleum Institute said. API/S
The U.S. Energy Information Administration (EIA) is due to publish official U.S. crude and fuel product data on Wednesday. EIA/S
As markets remain bloated halfway into the cuts, there is a broad expectation that the supply reductions will be prolonged into the second half. OPEC-led strategy to rebalance oil markets is not without controversy, however.
As OPEC and especially Saudi Arabia cut production, producers not participating in the accord have been quick to fill the supply gap and gain market share. the United States in particular, shale oil drillers have seized the opportunity to ramp up output and exports.
As a result, China became the third-biggest overseas destination for U.S. crude in 2016, according to EIA data, up from ninth position the previous year.