LONDON: Brent crude oil slipped below $108 a barrel on Monday as weak demand in Europe and Asia and ample supply in the Atlantic basin outweighed political tensions in Ukraine and the Middle East.
North Sea and West African physical crude markets are over supplied, traders and brokers say, with sellers discounting heavily in an effort to attract buyers such as oil refiners.
September Brent was down 66 cents at $107.73 a barrel by 0840 GMT. Earlier in the session, it fell to a low of $107.79. The contract gained 1 percent last week.
U.S. crude futures for September dropped 68 cents to $101.41 a barrel, after ending last week 1 percent lower.
North Sea crude oil cargoes for immediate lifting are trading at deep discounts, more than $1.50 per barrel below the front futures month.
Michael Wittner, an oil analyst at French bank Societe Generale, said oversupply in the West African crude market was "a bearish sign".
He added, "Weak refining margins in all regions, including the United States, argue that the situation won't turn around quickly."
Traders reported around 30 million unsold barrels of West African crude for lifting in August, and September cargoes were already becoming available, further depressing the market.
But global political tensions helped underpin oil prices.
In Ukraine, clashes between Ukrainian troops and pro-Russian rebels intensified on Sunday, killing at least 13 people.
The United States and the European Union will discuss further economic sanctions on Russia this week, but the market appeared not to be worried by the risk of disruption to oil supplies.
"Market sentiment is still that the sanctions are unlikely to have any material impact on the availability of oil," said Eugen Weinberg, global head of commodities analysis at Germany's Commerzbank.
Tension in the Middle East eased a little after Hamas said it backed a 24-hour humanitarian truce. U.S. President Barack Obama had called for a ceasefire, but there was no sign of any comprehensive deal to end fighting with Israel.
Neither Gaza nor Israel is a major oil exporter, but the conflict contributes to ongoing political tensions in other areas in the Middle East.
"It adds up to a very bleak picture for the supply from this region, but the market is failing to address it," Weinberg said.
Traders kept an eye on Libya, where government Special Forces and Islamist militants clashed over the weekend, resulting in at least 36 deaths in Libya's eastern city of Benghazi.
Libyan oil production fell to around 450,000 barrels per day (bpd) last week, a drop of nearly 20 percent.
Iraqi oil exports may increase after the U.S. Coast Guard cleared a tanker to unload a cargo off Texas on Sunday. A State Department official signalled Washington would not intervene to block delivery of the crude.
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