UPDATE 8-Brent oil falls, spread narrows on profit-taking
* Brent-WTI spread sold off on profit-taking after touching widest in 6 months
* Libya hikes pay for oil workers; exports lowest since 2011
* Market anticipates return of U.S. refining capacity
(Updates prices to settlement)
NEW YORK, Oct 31 (Reuters) - Brent crude futures dropped more than $1 on Thursday, reversing the previous session's gains, as traders booked profits and turned their focus to the end of the U.S. refinery maintenance season, which is expected to boost demand for U.S. crude.
Traders sold Brent after the spread between the international benchmark and the U.S. oil benchmark West Texas Intermediate (WTI) grew to the widest in six months at $13.60 per barrel. Brent's premium over WTI had risen by nearly $5 over the past five sessions.
"We jumped up $5 in a week," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut. "People are looking to scrape some money up."
Brent ended October nearly flat as disruptions to oil shipments from major producer Libya kept supply tight.
Brent crude for December delivery fell $1.02 to settle at $108.84 a barrel.
U.S. crude pared earlier losses to settle down 39 cents a barrel at $96.38. It posted a 5.8 percent drop for the month, its biggest such drop in a year.
U.S. oil rose to a session high of $97.03 earlier in the session. WTI's discount to Brent <CL-LCO1=R> finished the session at $12.46.
The January WTI contract slipped to a 3-cent discount to February <CLF4-G4> for the first time since June. That state of so-called "contango," in which the first month's price is lower than that of later months, indicates a well-supplied market.
Libya's efforts to end an oil crisis that has reduced its exports to a trickle, supporting Brent, looked set to fail on Thursday after oil workers appeared to shrug off a 67 percent pay increase and a deal to reopen the eastern Hariga terminal looked close to collapse.
The country's oil exports slowed to their lowest level since its 2011 war this week as protests which have halted terminals and fields in the east spread to the west of the country.
Oil stocks rose for a third week at Cushing, Oklahoma, delivery point for U.S. oil futures, U.S. government data showed. The data, released on Wednesday along with figures showing the largest six-week increase in overall U.S. inventories since April 2012, pressured U.S. crude prices, which helped boost the premium for Brent.
Refiners should soon start absorbing some of that excess supply as seasonal maintenance comes to an end. Some 700,000 barrels per day of refinery capacity is expected back online by mid-November, IIR Energy data showed.
"Oil is gaining in relationship to the products in anticipation that refinery runs are going to start kicking up pretty soon and demand's going to get better," said Phil Flynn, an analyst at Price Futures Group in Chicago, Illinois.
Oil producers are expected to begin filling the southern leg of TransCanada's Keystone pipeline next month, which will also drain supplies from Cushing.
(Additional reporting by Jeanine Prezioso in New York, Simon Falush in London and Manolo Serapio Jr. in Singapore; editing by Jane Baird, Keiron Henderson, David Gregorio, Peter Galloway and Chizu Nomiyama)