GO
Loading...

UPDATE 1-Brent holds near $106 after ample supply pulls down prices

* Brent posts biggest loss in July since April 2013

* WTI falls 6.8 percent in July, worst month since May 2012

* Brent-WTI widens to near $8/bbl

* Major WTI consumer shuts refinery for four weeks

(Adds quotes, updates prices)

SINGAPORE, Aug 1 (Reuters) - Brent crude held near $106 a barrel on Friday as ample supply continued to drag on prices a day after the benchmark posted its worst monthly performance since April 2013.

Analysts expect global production to exceed demand this year, while a supply glut has built up in Africa and Europe.

Brent crude edged down 5 cents to $105.97 a barrel by 0451 GMT after a 5.6 percent drop in prices last month.

U.S. crude futures for September delivery fell 16 cents to $98.01 a barrel, following a 6.8 percent decline last month, the biggest monthly loss since May 2012.

"Suddenly, people wake up and realise that even with the geopolitical risks in the world there is this surplus of physical crude," said Tony Nunan, a senior risk manager at Mitsubishi Corp.

Still, Brent's forward prices have risen substantially on worries about longer term oil output in Iraq and Libya, he said.

OPEC's second largest producer Iraq is battling an Islamic insurgency in the north. The conflict threatens to split the country, but has yet to have an impact on near-record oil exports from the south.

Baghdad is also embroiled in a dispute with Iraqi Kurdistan over oil exports via Turkey.

Production at another OPEC producer Libya remained way below the more than 1 million bpd that it was pumping in 2012 before protests curbed output and exports.

Given the overall supply situation, normally there would be a steeper fall in oil prices, Nunan said. "But the reason we're not is because OPEC has so many geopolitical issues."

Energy investments in Russia also faced delays after sanctions imposed by the United States and European Union limited access to funds.

CONTANGO MARKET

Brent is in its longest contango - where forward prices are higher than the front-month - since early 2011, reflecting weak physical demand and an oversupplied Atlantic Basin, Morgan Stanley analysts led by Adam Longson said in a note.

"By fourth quarter, we expect to see a more balanced global crude market," the bank said.

The spread between Brent and West Texas Intermediate (WTI) <CL-LCO1=R> has stretched to near $8 a barrel on closure of a refinery that is a major consumer of WTI crude.

CVR Refining said on Thursday that its 115,000-barrel-per-day Coffeyville, Kansas, refinery, could be down four weeks after a July 29 fire in the facility's isomerization unit.

(Reporting by Florence Tan; Editing by Tom Hogue)