* Fighting comes days after Kerry push for peace
* Bentiu scene of ethnic massacre last month
* Has changed hands several times during conflict
By Andrew Green
JUBA, May 5 (Reuters) - South Sudan's army battled rebels in and around the northern oil town of Bentiu on Monday, hitting hopes for renewed peace efforts days after U.S. Secretary of State John Kerry visited to try and revive faltering negotiations.
It was not immediately clear on Monday who controlled the town, the scene of an ethnic massacre last month which triggered fears of a looming genocide in the world's newest nation.
A spokesman for the government SPLA forces said they had recaptured Bentiu, capital of Unity state, and had now launched a broader offensive in the surrounding region.
But a spokesman for rebel leader Riek Machar said fighters loyal to the former vice president had driven the government troops out in an early morning counter-attack.
"There will be fighting around Bentiu. The SPLA is trying to establish full control over Unity state and that will take some time," SPLA spokesman Colonel Philip Aguer told Reuters.
Bentiu has changed hands several times since fighting broke out in the capital Juba between soldiers loyal to President Salva Kiir and troops backing Machar in mid-December, quickly spreading across the country.
The violence, triggered by a power struggle between the two men, has often followed ethnic faultlines, pitting Kiir's Dinka against Machar's Nuer, and has forced a complete halt to oil production in Unity.
Thousands of civilians have been killed and more than a million forced to flee their homes, prompting U.N. warnings of a famine in some parts of the country, which declared independence from Sudan in 2011.
Kerry travelled to the east African country on Friday, with peace negotiations in neighbouring Ethiopia going nowhere. A January ceasefire deal failed.
Kiir told Washington's top diplomat that he was ready for face-to-face talks with Machar, but his rival held off from promising to take part.
Oxfam spokeswoman Grace Cahill said she had received reports of heavy shelling on Monday morning in Bentiu from staff members working at the United Nations base there.
"The trauma that continued fighting in Bentiu today is having upon civilians is huge," she said.
Fears of a descent into genocide grew after the United Nations said rebels had massacred hundreds of civilians in Bentiu last month. Days later, residents of Bor, a predominantly Dinka town, attacked Nuer camped in a U.N. base.
The United Nations says more than 25,000 civilians have sought shelter in its camp in Bentiu to escape fighting. Tens of thousands more are hiding in other bases across the country.
Army spokesman Aguer said the SPLA had also taken back the town of Nasir, in Upper Nile state, an important base for the rebels in Upper Nile state which continues to pump oil.
Oil output, South Sudan's economic lifeline, has been cut by a third to about 160,000 barrels per day since fighting began.
Oil firms operating in South Sudan include China National Petroleum Corp, India's ONGC Videsh and Malaysia's Petronas. (Writing by Richard Lough; Editing by Andrew Heavens)