Brent at 3-Month Low on Libyan Output

Libyan militia strikes Tripoli airport, U.N. pulls out; OPEC, U.S. offset concerns of supply disruptions. U.S. crude stocks down 2 mln barrels last week.

Brent crude oil fell more than $1 a barrel to a three-month low below $106 on Tuesday, extending losses to almost 9 percent since mid-June, as weak demand and rising Libyan supplies overshadow renewed violence in the country.

Libya's oil output has risen to 588,000 barrels per day (bpd), Libya's acting oil minister told Reuters, an increase of around 25 percent since the weekend despite renewed fighting between militias in the country's capital.

"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 $1.20 to $105.78 a barrel by 1125 GMT, hitting a three-month low of $105.68. The front-month August contract expires on Wednesday, further pressuring prices as investors liquidate positions, analysts and traders said.

U.S. crude fell 82 cents to $100.09 a barrel and was approaching the 200-day moving average at $99.92, a key technical indicator closely watched by traders.

Despite rising supplies from Libya, concerns mounted over rising violence after a Libyan militia shelled Tripoli airport, destroying 90 percent of planes parked there. The turmoil prompted the United Nations to pull its staff out of the North African OPEC producer.

Traders were also eyeing the situation in Iraq as the army and Shi'ite militia forces launched a new attack to regain the city of Tikrit.

Brent prices briefly spiked to a nine-month high of $115.71 in June after the advance of Islamist insurgents in the north of the country sparked fears over supplies from OPEC's second-largest producer.

"OPEC has been saying for months and years that they will make sure that there is enough oil," said Bill Hubard, chief economist at Markets.com in London.

"The situation with Libya is back and forth ... but the key thing is that right now there is enough oil stockpiled globally, especially in the United States."

Lower global refining activity and weaker buying from China have also weakened demand for crude oil, London-based consultancy Energy Aspects said in a note on Tuesday.

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. Tehran and six world powers are racing to conclude an agreement on Iran's nuclear programme ahead of a July 20 deadline.
 

By Rowena Caine, Ron Bousso and Keith Wallis;