Aug 3 (Reuters) - The U.S. Treasury said on Monday it expects to borrow $739 billion in the third quarter, $68 billion more than it projected in May, as lower projected cash flows were only partly offset by a higher-than-assumed starting cash balance.

Stripping out the benefit of that larger starting cushion, the increase in borrowing needs is $87 billion above the May estimate. The department's quarterly refunding statement assumes a cash balance of $950 billion at the end of September.

For the fourth quarter, Treasury projected borrowing of $628 billion, based on a year-end cash balance of $850 billion.

The department also said it borrowed $190 billion in the second quarter, ending June with a cash balance of $919 billion. That was $1 billion above its May projection and $18 billion less than expected when excluding the higher than assumed end of quarter cash balance.

Treasury will detail its refunding plans, including auction sizes, on Wednesday. Traders will be watching closely for any signal that the department intends to lean more heavily on longer-dated debt in coming quarters.

The stakes for that announcement have risen in recent weeks. Oil prices have surged as the war between Israel and Iran re-intensifies, deepening concerns about already-elevated inflation and pushing longer-dated Treasury yields to multi-year highs.

Against that backdrop, analysts said Treasury has added incentive to stick to a predictable issuance path and avoid any surprises that could further rattle a jittery bond market.