UPDATE 8-Brent oil dips below $107, market well-supplied

Thu Jul 24, 2014 9:38pm BST

* China July factory sector grows at fastest pace in 18 months

* Weak demand from European refiners creating contango

* IMF cuts growth forecasts in U.S., China (Updates prices to settlement, adds Brent-WTI spread)

By Anna Louie Sussman

NEW YORK, July 24 (Reuters) - Oil futures prices fell on Thursday as unseasonably weak demand and plentiful supplies of crude and refined products offset strong Chinese factory data that could presage higher energy demand in the world's No. 2 oil consumer.

China's factory activity in July posted its fastest expansion in 18 months as new orders surged, a preliminary HSBC survey showed.

Europe's demand outlook was dimmer. Due to an influx of oil products from the United States, European refiners have been cutting runs or even idling plants at what should be one of the busiest times of the year.

This has pressured physical crude prices, with West African and North Sea barrels selling slowly even at bargain levels.

"Brent is lower as a function of the fact that we're at peak refinery season and there isn't a lot of demand in the U.S. for Brent quality oil," said Stephen Schork, editor of The Schork Report in Villanova, Pennsylvania.

Brent for September delivery lost 96 cents to settle at $107.07 a barrel, after closing 70 cents higher on Wednesday.

U.S. crude lost $1.05 to settle at $102.07 a barrel, after gaining 73 cents in the previous session.

The spread CL-LCO1=R between the two benchmarks closed at $5.

"Brent is in contango, reflecting weak demand from European refiners," said Ole Hansen, senior commodity strategist at Saxo Bank. Contango is a situation in which the price of oil for near-term delivery is cheaper than that for delivery further into the future.

U.S. RBOB gasoline led the complex lower, down 0.94 percent to $2.833.

U.S. Labor Department unemployment data on Thursday suggested that the economic recovery remained on track, with initial weekly jobless claims falling to their lowest since February 2006.

The International Monetary Fund on Thursday chopped its 2014 forecast for global economic growth to take into account weakness early in the year in the United States and China, the world's two biggest oil consumers.

NO SUPPLY CONSTRAINTS

Conflicts in Eastern Europe and the Middle East were also keeping a floor under prices but crude supply from Iraq remains unaffected by fighting there.

Analysts expect no sustained gains in oil prices unless supply is disrupted but some say the market has become complacent about the risks.

"Oil was overpriced to begin with and now the geopolitical risk is starting to come down, which I think is healthy for the market," said Oliver Sloup, director of managed futures at iitrader.com in Chicago.

In another development, South Korea and Japan bought the first condensate cargoes to be exported from the United States since the easing of a 40-year ban on U.S. crude exports. (Additional reporting by Lorenzo Ligato in New York, Claire Milhench in London and Jacob Gronholt-Pedersen in Singapore; Editing by Jason Neely, Jane Baird, Diane Craft and James Dalgleish)

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