Oil set for weekly loss as profit-taking outweighs Mideast strife

By Ahmad Ghaddar and Christopher Johnson

LONDON (Reuters) - Oil prices fell on Friday and were set for a weekly loss as investors sought to book profits, despite tensions in the Middle East that have slashed supplies of crude.

Brent crude was down 15 cents at $57.08 a barrel by 1230 GMT. U.S. light crude was 30 cents lower at $50.99.

"There's a little bit of profit-taking," said Olivier Jakob, chief strategist at consultancy Petromatrix. "The market has really been treading a small range all of this week without any true momentum."

Oil exports from Iraq's Kurdistan via the Turkish port of Ceyhan were flowing at average rates on Friday of 216,000 barrels per day (bpd), down from the usual flows of around 600,000 bpd, a shipping source said.

Iraqi troops regained control of two major oilfields northwest of Kirkuk from Kurdish Peshmerga forces this week, and the oil ministry in Baghdad expects to bring the fields back on stream on Sunday.

Russia's biggest oil company, Rosneft, has agreed to take control of Iraqi Kurdistan's main oil pipeline in a $1.8 billion investment.

Jakob said the deal with Rosneft "makes it a bit harder for Baghdad to do anything against those flows".

Despite the losses on Friday, analysts said the market was on a path towards rebalancing.

"The oil market has moved into modest undersupply and we expect this will persist at least through the end of the year," U.S. investment bank Jefferies said.

U.S. commercial stocks of crude oil have dropped 15 percent from their March records, to 456.5 million barrels, below levels seen last year.

Part of this drawdown has been due to rising exports as a result of the steep discount of U.S. crude to Brent, which makes it attractive for American producers to export their oil.

Crude oil for immediate use now carries a premium over forward futures, making it profitable to sell oil produced now rather than storing it for sale later.

Shipping data in Thomson Reuters Eikon shows that overseas U.S. crude oil shipments have soared from virtually zero before the government loosened export restrictions in late 2015 to around 2.6 million bpd in October.

"While outbound shipments recently approached 2 million bpd, our math suggests that physical bottlenecks are unlikely to kick in until waterborne exports approach 3.2 million bpd," RBC Capital Markets said.

(Reporting by Ahmad Ghaddar and Christopher Johnson; Additional reporting by Henning Gloystein and Vidya Ranganathan in Singapore; Editing by Dale Hudson and Jason Neely)