LONDON, Nov 18 (Reuters) - Oil prices edged up on Monday

after fighting between Russia and Ukraine intensified over the

weekend, although concerns about fuel demand in China and

forecasts of a global oil surplus weighed on markets.

Brent crude futures were up 55 cents, or 0.8%, to

$71.59 a barrel at 0954 GMT, while U.S. West Texas Intermediate

crude futures were at $67.45 a barrel, up 43 cents, or

0.6%.

Russia unleashed its largest air strike on Ukraine in almost

three months on Sunday, causing severe damage to the country's

power system.

In a significant reversal of Washington's policy in the

Ukraine-Russia conflict, President Joe Biden's administration

has allowed Ukraine to use U.S.-made weapons to strike deep into

Russia, two U.S. officials and a source familiar with the

decision said on Sunday.

The Kremlin said on Monday that any such decision would mean

the direct involvement of the United States in the conflict, and

accused Biden's administration of escalating the war.

"Biden allowing Ukraine to strike Russian forces around

Kursk with long-range missiles might see a geopolitical bid come

back into oil as it is an escalation of tensions there, in

response to North Korean troops entering the fray," IG markets

analyst Tony Sycamore said.

Saul Kavonic, an energy analyst at MST Marquee, said: "So

far there has been little impact on Russian oil exports, but if

Ukraine were to target more oil infrastructure that could see

oil markets elevate further."

In Russia, at least three refineries have had to halt

processing or cut runs due to heavy losses amid export curbs,

rising crude prices and high borrowing costs, according to five

industry sources.

Brent and WTI fell more than 3% last week on weak data from

China, the world's second-largest oil consumer, and after the

International Energy Agency forecast that global oil supply

would exceed demand by more than 1 million barrels per day in

2025, even if output cuts remain in place from OPEC+.

China's refinery throughput fell 4.6% in October from last

year and the country's factory output growth slowed last month,

government data showed on Friday.

Investors also fretted over the pace and extent of interest

rate cuts by the U.S. Federal Reserve that have created

uncertainty in global financial markets.