* EU reaches deal on Russia sanctions, prompts short rally
* U.S. to impose new sanctions on Russia in energy, arms and finance sectors
* U.S. crude oil stocks fall 4.4 mln bbls - API (Updates prices to settlement, adds Brent-WTI spread, analyst quote)
By Lorenzo Ligato
NEW YORK, July 29 (Reuters) - Brent crude ended slightly higher on Tuesday as new sanctions on Russia looked set to worsen relations between Moscow and the West, while U.S. prices slipped after a Kansas refinery fire curbed demand for WTI crude.
Brent futures reversed early morning losses after news that the European Union and the United States expanded economic sanctions on Russia for its role in the Ukraine crisis. However many traders remained dubious over whether the measures would have a major impact on immediate supplies.
“The new sanctions against Russia don’t seem to be a game-changer, as long as we don’t have a supply disruption,” said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut.
Brent crude gained 15 cents to settle at $107.72 a barrel, after swinging between $107.13 and $108.05 earlier in the session.
U.S. crude lost 70 cents to settle at $100.97 a barrel after touching an intraday low of $100.37, the lowest since mid-July. Prices gained another 10 cents after-hours, following industry data showing another big 4.4 million barrels drop in nationwide crude oil inventories last week.
U.S. crude prices tumbled after news that CVR Energy Inc’s 115,000-barrel-per-day refinery in Coffeyville, Kansas, a major consumer of West Texas Intermediate crude, was shut down after a fire in a gasoline unit. There was no immediate indication of when production might resume.
Inventories in the Cushing, Oklahoma, delivery point for the U.S. crude contract, have fallen to their lowest in six years, putting more scrutiny on local supplies in the area. Data released on Tuesday by the American Petroleum Institute showed Cushing stocks fell by a further 914,000 barrels.
The spread CL-LCO1=R between the two benchmarks widened to close at $6.75, its widest since July 3.
Both markets bounced off their intraday lows after reports emerged that the European governments agreed on new economic sanctions against Russia, targeting the country’s oil industry, defence, dual-use goods and sensitive technologies.
Putting further pressure on Russia, U.S. President Barack Obama said in an official statement on Tuesday afternoon that the United States has expanded sanctions to include energy, defense and finance sectors of the Russian economy.
Escalating tension between Russia and the West might generate political backlash from Russian President Vladimir Putin that could impact global oil exports and energy markets, analysts said.
“If the European Union starts imposing these sanctions, what matters is, what is Putin going to do?,” said Carl Larry, CEO of consultancy Oil Outlooks in Houston, Texas.
However, global oil production appears to have exceeded demand, leaving pockets of excess supply in Africa and Europe that could mitigate the impact of any backlash from Russia.
West African physical crude markets remain over-supplied and crude exports from Iraq, the second-largest OPEC producer, stayed near record levels as oil output in the south has been unaffected by the conflict with Islamist militants.
Limited oil disruptions hit Libya, where oil production fell to around 450,000 barrels per day (bpd) last week amid escalating violence. But analysts said the OPEC producer’s low output has already been factored into oil prices. (Editing by Andre Grenon and Gunna Dickson)