Brent inches up towards $103, but supply glut caps gains

By Florence Tan

SINGAPORE (Reuters) – Brent crude edged up towards $103 a barrel on Tuesday, rising for a second session, although persistent supply pressure and weak economic data in major consumer countries curbed gains.

The benchmark is set for a second monthly decline in August as slow growth in China and Europe has curbed oil demand and led to a supply glut in the Atlantic Basin, offsetting the impact on prices from geopolitical tensions.

Brent crude rose 8 cents to $102.73 a barrel as of 0627 GMT, after closing up 36 cents. U.S. crude, or West Texas Intermediate (WTI), gained 18 cents to $93.53 a barrel after settling down for the third straight session on Monday.

Technical charts showed that oil futures, especially the U.S benchmark, were in oversold territory, said Avtar Sandu, a senior commodities manager at Phillip Futures in Singapore.

"There's not much room for prices to move lower," he said. "The market needs a new driver."

Investors have unwound a geopolitical risk premium in Brent, discounting the possibility of supply disruption despite conflict in Iraq, Libya and Ukraine.

Oil output from OPEC's most "at risk group of countries" such as Iran, Libya, Iraq and Nigeria is instead picking up, Barclays analysts said in a note.

Disrupted supply from these countries totalled less than 400,000 barrels per day in July, down from 1.6 million bpd in September last year, they said.

Iraqi Kurdistan has also managed to export a few cargoes despite the Islamist insurgency in the north.

Still, political instability reigns in Iraq and Libya. Libya's ambassador to Egypt, Mohamed Jibril, called on Monday for foreign assistance to protect its institutions, airports and natural resources, especially the oilfields.

Following air strikes in Iraq, the United States is preparing military options to put pressure on the Islamic State in Syria.

In Europe, western sanctions on Russia are hurting growth in the region, while hopes of progress at Tuesday's talks between top leaders of Russia and Ukraine were slim.

Brent's premium to U.S. crude hit the widest in more than two months on Monday following a pipeline oil flow switch that will send more crude to WTI's delivery point in Cushing, Oklahoma.

Investors will scour weekly U.S. oil inventory data due on Tuesday and Wednesday that could shed more light on supply and demand in the world's largest oil consumer.

U.S. commercial crude oil inventories are forecast to have increased 1.8 million barrels in the week to Aug. 22, while refined product stockpiles fell, a preliminary Reuters survey of four analysts showed on Monday.