UPDATE 9-Oil pares early losses on strong U.S. services sector data
* U.S. services sector growth accelerated in July
* Libyan oil output improves to 700,000 bpd -oil minister
* Euro zone retail sales decline in June
* Coming up: API U.S. inventory data Tuesday at 2030 GMT
(Updates with settlement prices, Brent-WTI spread, gasoline futures drop) NEW YORK, Aug 5 (Reuters) - Brent crude oil pared early losses on Monday to trade back toward $109 a barrel as selling pressure eased following a report showing strong growth in the U.S. services sector. Brent and U.S. crude each lost more than $1 earlier in the session on news of rebounding production in Libya and the North Sea and as euro zone data showed an across-the-board drop in retail sales in June, the first decline in three months. But both benchmarks rebounded after the Institute for Supply Management (ISM) reported the pace of growth in the U.S. services sector surged to a five-month high in July.
"The market turned after the services number came out," said Gene McGillian, an energy analyst at Tradition Energy in Stamford, Connecticut. "Our little selloff was a continuation of profit-taking generated from last week's disappointing employment report and the Libyan export terminal coming back online, but it didn't really attract a lot of sellers." Brent lost 25 cents to settle at $108.70 a barrel after earlier dropping as much as $1.40 to $107.55. U.S. crude oil futures lost 38 cents to settle at $106.56 a barrel after earlier falling to $105.70. The North Sea Benchmark's premium to its U.S. counterpart widened to $2.14 per barrel after having reached intraday highs of $2.50 and lows of $1.55 by the time of settlement. Gasoline prices took heavier losses, with the RBOB contract dropping 4.5 cents, or almost 1.5 percent, to settle at $2.95 per gallon.
SUPPLY GROWTH Oil prices remained under pressure from news of increased supply from Libya and the North Sea, despite the uplifting ISM report. Libyan Oil Minister Abdelbari al-Arusi told a news conference on Monday that the country's oil output had improved to around 700,000 barrels per day (bpd) and the government was working to end protests at oil facilities. Arusi said last week that strikes and protests at oil terminals had cut output to 330,000 bpd from 1.4 million bpd before output was disrupted. "The return of Libyan production has applied pressure to the oil complex, including products, because the loss of Libyan oil would probably have helped exports from the United States," said Phil Flynn, an analyst with Price Futures Group in Chicago. Output is also improving in the North Sea, industry sources say, with news that the Buzzard oilfield, Britain's largest, was expected to begin restarting later on Monday, on schedule, after a five-day maintenance shutdown. Loss of production from key oil exporters has been an important support for prices over the last month, with a series of unscheduled outages disrupting output. Shipments from Iraq have also been hit by damage to pipelines, and maintenance work is expected to cut Iraqi output The European retail sales figures for June cast a shadow over data from Britain and Germany showing modest growth in manufacturing and construction, highlighting the fragile nature of Europe's economic recovery and energy demand. Markit's composite euro zone PMI broke above the 50 growth threshold for the first time since January 2012. German business activity rebounded, while the downturns in the euro zone's next three biggest economies - France, Italy and Spain - eased.
(Additional reporting by Nicolas Medina Mora Perez and Robert Gibbons in New York, Christopher Johnson in London, Manash Goswami in Singapore; Editing by Andrew Hay, Leslie Gevirtz and John Wallace)