Brent slips under $107 on demand woes, dollar supports

By Manash Goswami

SINGAPORE (Reuters) - Brent futures slipped below $107 a barrel on Monday due to concerns over demand growth, with a weak dollar and fears about supply disruptions keeping losses in check.

Investors have been rattled by the slowdown in China, and are awaiting manufacturing data to help gauge the demand outlook. Still, a fall in the dollar on expectations the U.S. Federal Reserve will affirm its low interest rate policy on Wednesday has helped support crude.

Brent crude slipped 23 cents to $106.94 a barrel by 0555 GMT, after ending 48 cents lower on Friday and sliding for a second straight week. U.S. oil fell 55 cents to $104.15 after settling 79 cents down in the previous session.

"Oil will not go up much higher or fall below these levels, with Brent drawing support from the Forties pipeline issues and the U.S. benchmark under pressure from rising production in North Dakota," said Yusuke Seta, a commodity sales manager at Newedge Japan. "It will be a volatile week for prices with key data and policy meetings due this week."

The North Sea's Forties pipeline has cut pumping rates by about 40,000 barrels per day (bpd) because of maintenance work, trade sources said, tightening supply of the crude that underpins the Brent benchmark.

In the United States, crude output hit its highest since 1990 in the week ended July 19, data from the U.S. Energy Information Administration showed.

Seta expects Brent to trade between $106 and $109 a barrel this week with the U.S. benchmark hovering around $105.

Brent's premium to the U.S. contract will stay between $3 and $6 a barrel as the European marker draws support from supply woes and West Texas Intermediate (WTI) crude is pressured by ample supplies, Seta said.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For a 24-hr chart analysis:

http://graphics.thomsonreuters.com/AS/WT1/20132907091305.jpg

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

DEMAND, SUPPLY OUTLOOK

Hedge funds took huge positive bets on U.S. crude last week just before the market turned south. Positive wagers by money managers on WTI reached a new record for the week ended July 23, data from the Commodity Futures Trading Commission showed.

"Investors will have to liquidate these positions they have built up, but the question is when," Seta said.

Investors are eyeing official data this week from China on its vast manufacturing sector after an initial reading from HSBC showed activity at its slowest in 11 months in July.

They are also awaiting a two-day policy meeting by the Federal Reserve starting on Tuesday. If the Fed confirms it will reduce its bond purchases by September, that will fuel another commodities sell-off. A delay will spur a rally.

"Fed Chairman Bernanke indicated at his semi-annual testimony that the central bank isn't yet ready to start winding back its asset purchases," analysts at ANZ said in a note. "Our base case remains that the Fed will begin tapering its asset purchase program in September."

Lingering supply disruption concerns continue to support prices. Explosions rocked the eastern Libyan city of Benghazi on Sunday, while protests risk new confrontations in Egypt.