Brent Crude Hovers Below US$103

Brent futures dipped on Thursday, but still held between $102 and $103 a barrel, as ample supply and a refinery fire in the United States that could reduce crude demand weighed on prices.

* U.S. crude inventories fall 2.1 mln bbls -EIA
* Fire hits BP's largest U.S. refinery
* Hope fades for Ukraine-Russia ceasefire deal
* Iraq Basra crude exports fall in Aug on bad weather -sources

Global oil supply is expected to exceed demand this year, cooling prices. Oil futures on both sides of the Atlantic Basin are on track to post a second monthly decline.

October Brent crude has been unable to break through the $102-$103 range this week, just off a 14-month low hit last week. On Thursday, Brent was down 3 cents at $102.69 a barrel by 0639 GMT.

U.S. crude slipped on news of the fire at BP's largest refinery in the United States. The October contract fell 25 cents to $93.63 a barrel.

"It's just dropped so much from its peak and rightly so as it looks like there is crude everywhere," said Tony Nunan, a risk manager at Mitsubishi Corp. "There's just too much supply and we've had terrible demand."

OECD oil inventories rose sharply in the second quarter, while tit-for-tat sanctions between the European Union and Russia have curbed growth in Europe, Nunan said.

Hopes that the presidents of Russia and Ukraine could reach a ceasefire deal dimmed after Ukraine accused Russia of launching a new military incursion across its eastern border on Wednesday.

Oil futures were little changed in the previous session following a neutral inventories report from the United States, while investors looked ahead to economic data to gauge the outlook for demand in the world's largest oil consumer.

U.S. crude stocks fell 2.1 million barrels last week, more than expected as refineries processed more, but inventories at the Cushing, Oklahoma hub rose 508,000 barrels, data from the Energy Information Administration showed on Wednesday.

"The combination of relative cheap feedstock and a burgeoning product short in Latin America has perpetuated the incentive of all refineries to maximise operations," BNP Paribas analysts said in a note.
Political instability in Iraq and Libya continued to weigh on investors' minds even though exports managed to rise instead of fall in recent months.

Analysts have warned that a comeback by Libya's oil industry may be short-lived as armed groups and two parliaments fight for control of the North African country.
Similarly, an Islamist insurgency in Iraq has threatened to derail long term output plans set by OPEC's second largest oil producer.

Exports from Iraq's southern terminals so far in August have fallen by about 140,000 barrels per day, according to loading data and industry sources who attributed the decline to bad weather.

"That's why I think Brent has stabilised around here because there's so much uncertainty in the Middle East," Nunan said.

By Florence Tan