UPDATE 7-Oil drifts lower on ample supply, weak demand

* Demand weak in Europe and Asia; supplies ample

* U.S. pending home sales fall unexpectedly in June

* U.S., EU prepare more sanctions on Russia over Ukraine

(Updates prices, adds analyst quote)

NEW YORK, July 28 (Reuters) - Brent crude oil slipped on Monday as forecasts for ample supplies in the Atlantic basin and weak demand in Europe and Asia mitigated fears of escalating tension in Ukraine and the Middle East.

Oil prices on both sides of the Atlantic were down in early afternoon trading as reports emerged that North Sea and West African physical crude markets were oversupplied, with sellers discounting heavily to attract buyers such as refiners.

North Sea crude oil cargoes for immediate lifting are trading at deep discounts to later ones, at more than $1.50 per barrel below the front futures month.

Traders reported about 30 million unsold barrels of West African crude for lifting in August, and September cargoes were already becoming available, further depressing the market.

"The market is now focusing on weak fundamentals," said analyst Gene McGillian of Tradition Energy in Stamford, Connecticut. "If it wasn't for the geopolitical risk we priced in last week, the market would be at an even lower level."

September Brent fell 73 cents at $107.66 a barrel by 1:00 p.m. EDT (1700 GMT). U.S. crude futures for September fell 40 cents to $101.69, after ending last week 1 percent lower.

Oversupply in the West African oil market was a bearish sign that the global market was being pressured by weak refining margins and unseasonably low gasoline demand.

"Weak refining margins in all regions, including the United States, argue that the situation won't turn around quickly," said oil analyst Michael Wittner of Societe Generale.

Further pressure on oil prices came from reports that U.S. pending home sales fell 1.1 percent last month, an unexpected decline that cast a cloud over the housing market recovery.

Despite minimal supply disruptions, global political tensions continued to underpin oil prices against the backdrop of weak fundamentals.

"There is this recent trend where geopolitical fears ahead of the weekend cause prices to go up and then when the worst doesn't occur prices go down a bit on Monday," said Phil Flynn, analyst at Price Futures Group in Chicago.

In Ukraine, government troops recaptured more territory from pro-Russian levels, advancing towards the site where Malaysian flight MH17 was shot down on July 17.

The United States and the European Union will discuss further economic sanctions on Russia this week, but the market did not appear to be worried by the risk of disruption to oil supplies.

"Market sentiment is still that the sanctions are unlikely to have any material impact on the availability of oil," said Eugen Weinberg, global head of commodities analysis at Germany's Commerzbank.

Meanwhile, tension in the Middle East eased a little after Islamist Hamas militants said they backed a 24-hour humanitarian truce, though there was no sign of any comprehensive deal to end fighting with Israel.

Investors also kept an eye on Libya, where oil production fell nearly 20 percent to around 450,000 barrels per day, as violence continued to rip through Tripoli.

(Additional reporting by Rowena Caine in London, Florence Tan and Theodora D'cruz in Singapore; Editing by Christopher Johnson, Lisa Von Ahn and Diane Craft)