GO
Loading...

UPDATE 4-Oil slips below $109 on demand concerns, eyeing Ukraine

* U.S. fourth-quarter GDP growth seen revised down

* Mounting tensions in Ukraine keep risk appetite in check

* U.S. says global surplus oil capacity rises

(Updates comments, prices)

LONDON, Feb 28 (Reuters) - Oil dropped below $109 a barrel on Friday as tension in Ukraine dampened risk appetite and easing winter weather prompted expectations of weaker demand.

A severe winter in the United States supported oil prices earlier this year, helping oil avoid the weakness of other risk assets such as base metals, as have supply losses in Libya and South Sudan.

Brent crude fell 33 cents to $108.63 a barrel by 1125 GMT, after dropping 56 cents in the previous session. U.S. oil was down 9 cents to $102.31, narrowing losses after hitting an intraday low of 101.87.

Brent looks set to end the week down 1 percent, which would be its biggest drop in four weeks. U.S. crude is set to end the week slightly lower, ending six straight weeks of gains - the longest period of weekly rises in a year.

Analysts attributed some of the weakness in prices to profit-taking as traders wind down a month that is set to see U.S. crude prices reaching their highest point since October as demand spiked this month due to severe weather.

"Brent was a little overboard in the start of February, but generally these strong U.S. oil prices supported both benchmarks," said Andrey Kryuchenkov, analyst at VTB Capital.

"But now the weather is moderating and you're going to see refineries going into seasonal maintenance soon."

Rising tension in Ukraine has also contributed to a broader emerging markets sell-off that has weighed on risk assets such as oil.

Armed men took control of two airports in the Crimea region on Friday in what Ukraine's government described as an invasion and occupation by Russian forces.

"The current situation is more bearish than bullish for oil prices as oil supply has not been affected so far and the dollar is strengthening against the Ukrainian currency (the hryvnia) and the euro as risk appetite is hit," said oil brokers PVM in a report.

Concern about the demand outlook for the United States and China, the world's largest and second-largest oil consumers, also weighed on prices. China's yuan looked set for its biggest daily loss on record on Friday.

The U.S. Commerce Department is scheduled to release its fresh estimate of fourth-quarter GDP at 1330 GMT.

The U.S. government is expected to cut its estimate as exports and restocking by businesses were less robust than previously thought, according to a Reuters poll of economists.

Oil supplies appear to be more plentiful. Iranian exports have increased this year.

Global spare production capacity inched higher in January and February, the U.S. government's Energy Information Administration said on Thursday.

(Additional reporting by Alex Lawler in London and Manash Goswami in Singapore)