By Arathy Somasekhar

Aug 8 (Reuters) -

Oil prices fell in choppy trade on Thursday, and looked set

to snap a two-session streak during which they gained about 3%

due to growing supply risks amid simmering tensions in the

Middle East.

Brent crude futures fell 25 cents, or 0.3%, at

$78.08 a barrel by 0650 GMT, while U.S. West Texas Intermediate

crude lost 13 cents, or 0.3%, to $75.10. Both the

benchmarks had recovered from near-2024 lows in early trade on

Thursday, before turning negative.

The potential for Middle East supply disruptions have

caused volatility, with the killing of senior members of

militant groups Hamas and Hezbollah last week raising the

possibility of

retaliatory strikes

by Iran against Israel.

However, supply has not been affected so far, although

attacks on ships

in the Red Sea have forced tankers to take longer routes.

"The market has been on edge as it awaits a response from

Iran," ANZ Research said in a note.

Libya's National Oil Corporation has declared force majeure

in its Sharara oilfield from Tuesday, a statement said, adding

that the company had gradually reduced the field's production

due to protests.

Crude inventories in the United States, the world's largest

oil consumer, fell 3.7 million barrels, data showed, far

exceeding analyst expectations of a 700,000-barrel draw and

marking a sixth straight weekly decline to six-month lows.

"This suggests demand for physical barrels remains robust,

despite concerns about weak economic activity," ANZ analysts

said in the note.

Analysts at Citi said there was a possibility of a bounce

in prices to the low-to-mid-$80s again for Brent.

"Upside risks in the market remain, from still-tight

balances through August, heightened geopolitical risks across

North Africa and the Middle East, the possibility of

weather-related disruptions through hurricane season, and light

managed money positioning," Citi said in a note.