OREANDA-NEWS.  Brent crude oil dropped below USD 113 a barrel as fears of a disruption to oil output from Iraq receded after government forces launched a pushback against a Sunni militant insurgency.

Supply worries pushed the North Sea oil benchmark to a nine-month high above USD 115 two weeks ago and the contract is still up more than 3 percent this month, its strongest monthly showing since August.

But heavy fighting across large parts of Iraq has had little impact on the oil industry and the country remains the second biggest producer and exporter in the Organization of the Petroleum Exporting Countries.

Around 90 percent of Iraq's oil shipments are from the its south, an area so far largely unaffected by unrest.

"The fear premium is abating as the chances of fighting in Iraq hitting oil supplies diminishes," said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt.

"The advance of Sunni insurgents appears to have stopped," Fritsch said. "It now looks very unlikely that the rebels will reach the major oil supply areas."

Brent was down 65 cents at USD 112.65 a barrel by 0940 GMT, after ending last week 1.3 percent lower. U.S. crude declined 40 cents to USD 105.34 a barrel, after sliding nearly 1.4 percent in the past week.

"Overall the market seems to be headed lower with range-bound trades," said Ken Hasegawa, sales manager at Newedge.

The Iraqi army have sent tanks and armoured vehicles to dislodge insurgents from the northern city of Tikrit in a major pushback.

U.S. Secretary of State John Kerry and Saudi King Abdullah discussed global oil supplies during a meeting on Friday about the crisis in Iraq, a U.S. official said.

During the talks, Kerry referred to recent comments by a Saudi oil official that the world's largest oil producer would increase supplies if crises in Iraq or Syria disrupted supplies.

The reopening of a port in Libya and an easing of tensions over the Ukraine crisis also weighed on oil.

Investors awaited economic data later this week to gauge the outlook for the global economy and assess the direction for oil markets. Data due this week includes U.S. June payrolls on Thursday, a day early due to the July 4 holiday.

Economists polled by Reuters expect U.S. jobs to increase 213,000 in June for a fifth straight month of gains above 200,000.