LONDON: Brent crude oil slipped below $106.50 a barrel on Tuesday as easing concerns over global supplies offset the impact of renewed violence in Libya.
A Libyan militia shelled Tripoli airport, destroying 90 percent of planes parked there as renewed fighting between armed groups prompted the United Nations to pull its staff out of the North African OPEC producer.
The latest violence came as oil output from Libya rose to nearly 500,000 barrels per day (bpd) after Tripoli reached a deal with rebels controlling key export ports.
"Initial optimism about the return of Libya is fading and concerns are rising about the violence in Tripoli. But there is still a bit more oil coming out of Libya than a few weeks ago," said Richard Mallinson, analyst at London-based Energy Aspects.
Brent futures dropped 59 cents to $106.39 a barrel by 0915 GMT, remaining near a three-month low. The front-month August contract expires on Wednesday, further pressuring prices as investors liquidate positions, analysts and traders said.
U.S. crude fell 27 cents to $100.64 a barrel.
Brent prices have steadily fallen since hitting a nine-month high of $115.71 in mid-June after Islamist insurgents took control of swathes of northern and western Iraq.
"OPEC has been saying for months and years that they will make sure that there is enough oil. The situation with Libya is back and forth ... but the key thing is that right now there is enough oil stockpile globally, especially in the United States," said Bill Hubard, chief economist at Markets.com in London.
Lower global refining activity and weaker buying from China have also weakened demand for crude oil, Energy Aspects said.
U.S. INVENTORIES
Investors are watching for U.S. oil inventory reports due on Tuesday and Wednesday. Analysts polled by Reuters expect to see a 2-million-barrel drop in crude stocks for the week ended July 11 based on increased refining activity.
The market is also waiting for China's June growth figures, due on Wednesday, to give a sense of whether the world's second-largest economy and the world's top net oil importer needs further stimulus support.
Investors were also keeping an eye on geopolitical issues in Iran and Ukraine.
Tehran and six world powers are racing to conclude an agreement on Iran's nuclear programme ahead of a July 20 deadline.
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