Oil steadies around $105 but surplus still weighs

LONDON: Brent crude oil steadied around $105 a barrel on Monday as worries about global oversupply outweighed concerns over escalating violence in North Africa and the Middle East.

A supply glut in West African and Atlantic markets dragged Brent down 3.3 percent last week, despite tensions in Iraq, Libya and Ukraine that could disrupt oil production in future.

Brent crude was unchanged at $104.84 a barrel by 1028 GMT, after falling $1.18 on Friday to $104.84 a barrel, its lowest settlement since April 2.

U.S. crude edged up 15 cents to $98.03 after ending last week at its lowest settlement since Feb. 6. The U.S. contract futures fell more than 4 percent last week in its biggest weekly decline since January.

Prompt Brent has now been at a discount to later barrels in a formation called a contango for it's longest period since 2011, indicating a very well-supplied market.

"Physical markets may be just starting to stabilise, but are still relatively weak," said Olivier Jakob at Petromatrix consultancy in Switzerland. "Brent is still in a contango."

Jakob said escalating violence in Iraq and Libya would continue to offer some support oil prices in the coming week.

"Libya is really going down the wrong way. Production has been slowly coming off," he said. "Libya could quickly return to a much lower production level."

Libya's government said more than 20 people had been killed on Sunday, while fighting led to a huge fire raging nearby at the city's fuel depot, as battles raged for control of the capital's airport in the worst violence since the 2011-NATO-backed civil war.

In Iraq, July oil exports increased to an average of 2.44 million barrels per day (bpd), up from 2.42 million bpd in the previous month, despite shipments from major oilfields around Kirkuk being suspended due to fierce fighting in the north of country.

Islamic State fighters seized control of the Ain Zalah oilfield and the country's largest dam on Sunday, their first major victory over Kurdish forces since sweeping across much of northern Iraq in June.

In Europe, Belarussian President Alexander Lukashenko said his country was ready to supply Ukraine with oil products to assist with fuel shortages in the harvesting season.

Ukraine government forces seized two towns on the outskirts of Donetsk from pro-Russia separatists on Saturday, bringing the army to the edge of one of the two major cities still in rebel hands.