* Iraq sends tanks, armoured vehicles to fight insurgents
* Kerry, Saudi king discuss oil supply, U.S. official says (Updates prices to settlement, adds WTI-Brent spread, adds analyst quote)
By Lorenzo Ligato
NEW YORK, June 30 Brent crude fell toward $112 a barrel on Monday, hitting an 18-day low as did U.S. crude near $105, as investors grew less worried about potential supply disruptions from Iraq.
Heavy fighting between government-led forces and Sunni militants in the north of Iraq has spared refineries in the south, which process around 90 percent of the OPEC member's oil exports.
Brent is still up about 3 percent in June, its biggest monthly gain since August. But the North Sea benchmark has come off the nine-month high of $115.71 hit two weeks ago, as the Sunni advance in Iraq appears to have stalled.
"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. "It now looks very unlikely that the rebels will reach the major oil supply areas."
Brent lost 94 cents to settle at $112.36 a barrel, its lowest settlement since the rally spurred by the Iraqi crisis started on June 12.
U.S. crude lost 37 cents to settle at $105.37 a barrel, also its lowest since June 12.
The spread CL-LCO1=R between the two benchmarks further narrowed to close at $6.99, its tightest since June 16.
The prolonged narrowing of the spread between the two benchmarks generated some profit-taking in the market, with U.S. crude futures falling as low as $104.66 earlier in Monday's session, analysts said.
Analysts said the fear premium diminished after a meeting last Friday between U.S. Secretary of State John Kerry and Saudi King Abdullah to discuss global oil supplies in light of the Iraqi conflict.
During the talks, Kerry referred to recent comments by a Saudi oil official that the world's largest oil producer would increase supplies if there was a disruption due to crises in Iraq or Syria.
The reopening of a port in Libya and an easing of tensions over the Ukraine crisis also weighed on oil.
Although geopolitical events pointed to steady global oil supply, analysts said the fear factor would hold prices above $105 for U.S. crude and $110 for Brent in the near future.
"We'll be well supported as long as there are issues in Iraq and Russia," said Carl Larry, CEO of consultancy Oil Outlooks in Houston, Texas.
Economic data due this week will help investors gauge the outlook for the global economy and oil demand. Data will include U.S. June auto sales figures on Tuesday and U.S. June payrolls to be released a day early on Thursday due to Friday's Fourth of July 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.
"It should be a supportive week for the economic fundamentals," said Richard Hastings, macro strategist at Global Hunter Securities in Charlotte, North Carolina. (Additional reporting by Christopher Johnson in London, Manash Goswami and Florence Tan in Singapore; Editing by Jessica Resnick-Ault, David Gregorio and Alden Bentley)