* South Sudan says militia advancing on Bor
* Violence has contributed to higher oil prices
* Neighbours have set Dec. 31 deadline for talks
By Aaron Maasho and Carl Odera
JUBA, Dec 30 (Reuters) - Hundreds of people fled South Sudan's flashpoint town of Bor as the army warned of an imminent attack by the "White Army" militia on Monday, two weeks into ethnic fighting that has ravaged the world's newest state, officials said.
More than 1,000 people have been killed since clashes erupted in the capital, Juba, on Dec. 15 and spread to oil-producing regions, unsettling oil markets and raising fears of a civil war between the main Dinka and Nuer ethnic groups.
The White Army - made up of Nuer youths who dust their bodies in white ash - has in the past sided with Riek Machar, the Nuer former vice president of South Sudan who the government accuses of starting the fighting.
But a spokesman for the government of South Sudan's Unity state, now controlled by forces loyal to Machar, on Sunday denied Machar was in control of the White Army fighters, raising the prospect that the violence was spreading beyond the control of widely-recognised ethnic leaders.
"The (White Army) are now not very far from Bor so an attack is imminent," Sudan army (SPLA) spokesman Philip Aguer said by phone from Juba, 190 km (120 miles) south of Bor by road.
Civilians had fled the town, crossing the White Nile river and heading for the swamps, Information Minister Michael Makuei told Reuters. Nuer militias massacred Dinkas in Bor during an outburst of ethnic fighting in 1991.
The latest fighting has left South Sudan, one of the world's biggest recipients of aid, facing its most significant crisis since it gained independence from northern neighbour Sudan in 2011.
Western powers and bordering countries have scrambled to stem the unrest, worried the conflict could spill over porous borders and destabilise fragile East Africa.
South Sudan's neigbours have called on the warring factions to lay down their arms and begin peace talks by Dec. 31.
Ethiopian Foreign Minister Tedros Adhanom and Ugandan President Yoweri Museveni were in Juba on Monday to keep up the pressure.
MACHETES, STICKS AND GUNS
Bor's mayor, Nhial Majak Nhial, said he was urging civilians to escape Bor, the capital of Jonglei state which lies to the north of Juba as the White Army militia nears.
"They have attacked the village of Mathiang (18 miles from Bor), killing civilians and burning civilian houses down. They are butchering civilians," Nhial told Reuters from Bor, a low-rise dusty town.
These militia columns were reportedly marching in remote areas largely inaccessible to journalists and it was difficult to independently verify their numbers or movements.
The White Army is recognised by the ash, prepared from burnt cow dung, with which they cover themselves to ward off insects. They are armed with machetes, sticks and guns.
SPLA spokesman Aguer said a small SPLA reconnaissance unit clashed with White Army militia on Sunday night. Tribal elders over the weekend persuaded many of the Nuer youths to abandon their march, but officials said about 5,000 refused to turn back.
"People in Bor are scared," Makuei told Reuters. "Some of them have turned towards the swamps, and motorboats are crossing frequently to the other bank of the (White Nile) river."
The unrest in South Sudan and festering instability in Libya pushed oil prices towards $113 per barrel. South Sudan, a nation the size of France, has the third-largest oil reserves in sub-Saharan Africa after Angola and Nigeria, according to BP.
Regional leaders threw their weight behind the embattled Kiir last week, saying they would not allow a democratically elected government to be overthrown. (Writing by Drazen Jorgic; Editing by Richard Lough and Andrew Heavens)