Brent dips toward $107 as ample supplies weigh

By Florence Tan and Theodora D'cruz

SINGAPORE (Reuters) – Oil prices slipped for a second session on Tuesday, with Brent edging down toward $107 a barrel, as ample supply offset geopolitical tensions in the Middle East, Africa and Europe.

Despite conflicts in Ukraine, Iraq and Libya, global oil production has exceeded demand, leaving pockets of excess supply in Africa and Europe.

"Barring new supply outages, we see global supply capacity rising by 1.8 million barrels per day (bpd) in 2014 – the fastest growth in a decade," Morgan Stanley analysts led by Adam Longson said in a note, versus its forecast of a 1.1 million bpd demand growth this year.

Brent crude fell 2 cents to $107.55 a barrel by 0635 GMT, off an intraday low of $107.37, after dropping nearly 0.8 percent in the previous session.

U.S. crude dropped 28 cents to $101.39 a barrel, near a 1-1/2-week trough of $100.90 hit on Monday.

Crude exports from OPEC's second largest producer Iraq stayed near record levels as oil production in the south remained untouched by a conflict with Islamist militants in the north.

"We haven't actually seen any real threat of disruptions to oil supplies," said Desmond Chua, an analyst at CMC Markets in Singapore.

Libya's capital Tripoli has slipped into chaos, but analysts said the OPEC producer's low output, at way below 1 million barrels per day for close to two years, has already been factored into oil prices.

Israeli Prime Minister Benjamin Netanyahu has warned of a protracted war in Gaza, dashing any hopes of a swift end to the three-week conflict as Palestinian fighters launched an audacious cross-border raid.

In Europe, the U.S. and European leaders agreed on Monday to impose wider sanctions on Russia's financial, defence and energy sectors although these were not expected to impact Russian oil exports.

In the United States, investors eyed gasoline inventories which have weighed on U.S. crude prices.

"From last week, we saw gasoline supplies increase against the backdrop of a driving season and this comes off as a surprise as in this season, you would expect declining U.S. oil supplies," Chua said.

A preliminary Reuters survey showed U.S. gasoline stocks could have risen by 1 million barrels last week, adding to bloated supplies. U.S. commercial crude oil inventories likely dropped in the week to July 25, the survey showed.

The world is unlikely to see a sudden rush in U.S. oil exports as the Commerce Department has put on hold at least two companies' requests for permission to sell lightly processed crude abroad.

A firm dollar also kept a lid on oil prices by making the commodity expensive for holders of other currencies.

The dollar held close to a six-month peak against a basket of major currencies on Tuesday, ahead of this week's policy review by the U.S. Federal Reserve.