Brent dips toward $111, but supply woes aid

By Florence Tan

SINGAPORE (Reuters) - Brent crude slipped towards $111 a barrel on Friday, after settling at the highest in more than three weeks, although supply disruptions in Africa and firmer oil product prices in the United States checked losses.

Escalating violence in South Sudan threatened to further reduce the country's crude output, adding to supply cuts from Libya. U.S. gasoline and heating oil futures hit three-month highs on Thursday as strikes at two French refineries persist.

Brent crude slipped 34 cents to $111.64 a barrel by 0734 GMT after settling at $111.98 on Thursday, the highest since December 3. U.S. crude rose 1 cent to $99.56, after hitting a more than two-month top of $99.77 earlier.

Crude prices are expected to trade in a $1 range ahead of U.S. oil inventories data to be released later on Friday.

Brent is sandwiched between $111.50 and $112.50 while WTI is trading between $99, the 200-day moving average, and a psychological resistance of $100, said Masaki Suematsu, manager of the energy team at brokerage Newedge Japan.

"The market is vulnerable to profit-taking which could pressure prices on the downside," he said. "If the EIA data is bullish, WTI could break above $100."

Crude stockpiles are expected to fall for a fourth straight week while gasoline inventories could rise, analysts said in a Reuters poll.

Traders are now waiting for the report from U.S. Energy Information Administration (EIA) to gauge supply and demand in the world's top oil consumer.

But data from industry group the American Petroleum Institute showed that crude stocks unexpectedly rose 716,000 barrels last week as refineries boosted output, while gasoline inventories slumped and distillate stocks dropped.

A fall in U.S. jobless claims and stronger retail sales reinforced a more robust outlook for the world's largest economy next year. But some analysts do not expect this to translate into stronger fuel demand due to the use of more fuel-efficient vehicles and abundant cheap natural gas.

"A healthy economy is not linked to fuel demand," Suematsu said, adding that rising automobile fuel efficiency has squeezed gasoline consumption. "Natural gas is cheap so heating oil demand is unlikely to rise further."

(Editing by Himani Sarkar)