Crude weakens as supply jitters outweigh Mideast tensions

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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 70 cents to under $108 a barrel. U.S. crude futures for September fell 42 cents to $101.67, after ending last week 1 percent lower.

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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.

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

--By Reuters. For more information on commodities prices, please click here.