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UPDATE 1-Brent below $108 ahead of US GDP data, set to fall for 2nd week

* Brent set to slide for 2nd week, U.S. oil may fall 5 percent

* Hurricane Sandy threatens U.S. after slamming Cuba

* World's spare oil capacity grows as Iran sanctions bite

* Coming Up: U.S. GDP for third quarter; 1230 GMT

(Adds comments, weekly milestones, updates prices)

SINGAPORE, Oct 26 (Reuters) - Brent futures fell more than $1 to slip below $108 a barrel on Friday as investors waited for key U.S. economic data to gauge the demand growth outlook for oil with rising supplies weighing on prices.

The world's biggest economy likely grew at a 1.9 percent annual rate in the third quarter, according to a Reuters poll, but still well short of the pace economists say is needed to ensure steady recovery. Brent has fallen more than 3 percent this month in part on investor reluctance to lock in fresh positions ahead of U.S. elections.

Brent crude had slipped $1.02 a barrel to $107.47 by 0527 GMT. The contract ended higher on Thursday, after seven straight sessions of declines that marked its longest losing streak since July 2010. U.S. oil slipped 90 cents to $85.15, after ending up 32 cents.

``It is difficult to lock in fresh positions,'' said Tetsu Emori, a Tokyo-based commodities fund manager at Astmax Investment. ``Investors are awaiting election results and more data that supports a steady global economic recovery.''

Since climbing out of the 2007-09 recession, the U.S. economy has faced a series of headwinds from high gasoline prices to the debt turmoil in Europe and, lately, fears of U.S. government austerity. It has struggled to exceed a 2 percent growth pace and remains about 4.5 million jobs short of where it stood when the downturn started.

``There is an element of investors staying on the sidelines ahead of key data in the way prices are moving today,'' said Ben Le Brun, a market analyst at OptionsXpress.

``U.S. GDP will certainly have an impact across risk assets, including oil, and a surprise to the downside would be very bearish for oil.''

The European benchmark is set to fall 2.5 percent this week following a near 4 percent decline the week before. U.S. oil is on track to slide 5.5 percent, the lowest since Sept. 23.

Oil prices have also been dragged lower by rising U.S. inventories, poor corporate earnings and Europe's worsening financial crisis,

Rising supplies from Iraq and Libya have helped offset declines in Iranian exports, which have slumped due to tight Western sanctions.

GOING SPARE

The world's spare oil production capacity outside of Iran rose in the last two months to 2 million barrels per day, the Energy Information Administration (EIA) said, up from 1.8 million bpd in the previous two months, said the report, which is required by last year's Iran sanctions law.

``Commodity prices continue to be stifled by global demand concerns with U.S. corporate earnings season not exactly painting a picture of economic health for the coming year,'' Tim Waterer, sales trader at CMC Markets, said in a report.

Hurricane Sandy swelled into a major threat to much of the U.S. East Coast on Thursday after lashing Cuba with heavy rains and tree-toppling winds and swirling through the Bahamas, U.S. forecasters said.

They warned of flooding, heavy rains and high winds beginning late Thursday in Florida. Sandy may force refineries in New Jersey and Pennsylvania to slow or shut some operations, hurting gasoline and heating oil in the east coast.

Additional support for prices also came from Labor Department data showing initial claims for state unemployment benefits dropped 23,000 last week to a seasonally adjusted 369,000.

The four-week moving average for jobless claims rose 1,500 to 368,000. Economists generally think a reading below 400,000 points to an increase in employment, with hiring likely outpacing layoffs.

(Reporting by Manash Goswami; Editing by Joseph Radford)