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UPDATE 5-Brent crude hits 4-month low near $105, flirts with contango

Alexander Winning
Monday, 4 Nov 2013 | 8:59 AM ET

* Brent extends losses from previous session

* Prompt contract moves to discount for first time since June

* Coming Up: U.S. factory orders; 1500 GMT

(Updates prices, adds Brent move into contango, ICE data)

LONDON, Nov 4 (Reuters) - Brent crude futures fell towards $105 a barrel on Monday, extending heavy losses on Friday, as concerns the U.S. Federal Reserve could trim monetary stimulus added to a long-term view of slack demand and ample supply.

Brent crude futures for delivery next month briefly fell below the January contract <LCOc1-LCOc2>, the first time prices for prompt delivery have been at a discount since June. This structure is known as contango and indicates a weak market.

Brent crude for December fell 68 cents to $105.23 a barrel by 1337 GMT and hit a fresh four-month low of $105.13 after dropping $3 on Friday.

Brent for January delivery was at $105.24.

U.S. crude for December fell 44 cents to $94.17 after ending $1.77 lower in the previous session, rounding out a fourth straight week of losses.

"The overall view of the oil market is bearish. You have abundant supply, especially in the United States, a strong U.S. dollar and geopolitical risks have been pushed back for the moment," said Carsten Fritsch, an oil analyst at Commerzbank.

Christopher Bellew, an oil broker at Jefferies Bache, said Brent crude prices could approach $100 a barrel if traders believe the Fed will taper its stimulus programme at its next policy meeting in December.

Should the Fed rein in its monthly bond purchases, the dollar would strengthen, making dollar-denominated assets such as oil more expensive for holders of other currencies.

The dollar index eased slightly after climbing to a seven-week peak on Friday.

The Intercontinental Exchange said on Monday that hedge funds and other large speculators had reduced their bets on rising Brent prices for the eighth time in nine weeks in the seven days to Oct. 29.

Fund bets on rising Brent prices have almost halved to 119,451 net long positions, the equivalent on paper of almost 120 million barrels of oil, since hitting a record peak of 231,962 net long positions in late August, when Brent was close to $117.

LIBYA LIMITS DOWNSIDE

Tensions in major exporter Libya kept losses in check, however, as leaders of an autonomy movement in Libya's oil-rich east unilaterally declared a regional government on Sunday.

Strikes at ports and oil fields have slashed crude production to about 10 percent of Libya's capacity of 1.25 million barrels a day.

"The situation in Libya will limit any downside in Brent, until that is sorted we can expect some support for oil," Fritsch at Commerzbank said.

The spread between Brent and U.S. benchmark WTI <CL-LCO1=R> held steady around $11.20 after reaching $13.60 last week, its widest since April.

U.S. oil has been pressured by inventory data from the Energy Information Administration pointing to healthy stocks at the Cushing, Oklahoma, delivery point for the U.S. futures contract.

Harry Tchilinguirian, head of oil strategy at BNP Paribas in London, said the Brent/WTI spread could widen to $15 in the near term as weak refining margins limit the drawdown of Cushing stocks and outages of light oil support Brent.

"Double-digit spreads are likely to persist in the short term," Tchilinguirian said.

(Additional reporting by David Sheppard in London and Manash Goswami in Singapore; editing by William Hardy)

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