By Jacob Gronholt-Pedersen
SINGAPORE (Reuters) - Brent crude edged up towards $102 a barrel on Tuesday, but stayed near a 14-month low reached in the previous session on weak demand and easing concerns over risks to supply.
Brent shed nearly $2 on Monday, as investor worries over conflict in Iraq eased, and as higher Libyan oil output added to already ample supplies.
"There is still plenty of oil in the market, mostly due to weak demand from refineries in Europe and Asia," said Yusuke Seta, a commodity sales manager at Newedge Japan.
"At the moment, I don't see any factors that could possibly bring demand back into the market."
Brent crude for October delivery had risen 23 cents to $101.83 a barrel by 0522 GMT, after closing $1.93 a barrel lower on Monday.
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U.S. crude for September delivery was 34 cents higher at $96.75 a barrel. The contract, which expires on Wednesday, ended the previous session down 94 cents.
"Brent could test $100, but should find very very strong support at that level. OPEC countries will take action if oil goes below $100 because they won't be able to maintain their budgets," said Seta.
HIGHER U.S. OIL STOCKS
Iraqi and Kurdish forces recaptured Iraq's biggest dam from Islamist militants with the help of U.S. air strikes to secure a vital strategic objective in fighting that threatens to break up the key oil producing country.
In Ukraine, government forces advanced on pro-Russian rebels, but continued fighting in the country suggests the risks are far from over. Dozens of people, including women and children, were killed on Monday as they fled fighting in eastern Ukraine when their convoy of buses was hit by rocket fire.
The U.S. dollar gained against a basket of major currencies, while global equities also rose with Nasdaq hitting a 14-year high on Monday, supported by positive U.S. housing data and decreasing worries over Ukraine. A stronger greenback could drag on dollar-denominated oil.
The U.N. nuclear watchdog chief said on Monday Iran had begun implementing transparency measures ahead of an Aug. 25 deadline, as part of a long-running investigation into suspected atomic bomb research by Tehran.
U.S. commercial crude oil and refined product stockpiles were forecast to have fallen in the week to Aug. 15, a preliminary Reuters survey of analysts showed.
The analysts estimated, on average, that crude oil stocks decreased 1.5 million barrels last week. Distillate stockpiles were seen down 200,000 barrels, and gasoline inventories down 1.7 million barrels.
The survey was taken ahead of weekly inventory reports from industry group the American Petroleum Institute (API) due at 2030 GMT and from the U.S. Department of Energy's Energy Information Administration (EIA) due on Wednesday.
Despite falling inventories in the United States, large crude builds globally in the second quarter is now reflected in the weak market structure known as contango, where prices for prompt delivery is cheaper than for future months, analysts at Energy Aspects said in a note.
"Signs of a sustained demand recovery, and hence stockdraws, are needed to change the shape of the further forward Brent structure, even if potential new supply disruptions did not materialise," the analysts said.
"The market may need flat price to fall below $100 in order to stimulate demand, especially given the weakening macroeconomic backdrop," they said.
(Reporting by Jacob Gronholt-Pedersen; Editing by Joseph Radford and Biju Dwarakanath)