* Narrow scope of U.S., Europe sanctions eases fears of disruptions * U.S. crude pressured by expectations of inventory build * Brent's premium to U.S. crude to narrow in medium term - analyst (Adds quotes, updates prices) By Keith Wallis SINGAPORE, March 18 (Reuters) - Brent edged higher above $106 a barrel on Tuesday, with bargain-hunting kicking in after the benchmark fell nearly $2 in the previous session as there seemed little likelihood of the Ukraine crisis interrupting Russian oil supplies. Crude prices had earlier rallied in advance of the West's reaction to the outcome of the weekend referendum on whether Crimea should join Russia. Prices then dropped when U.S. and European sanctions imposed on Monday targeted Russian and Crimea individuals and not broad trade. Gains seen in Asia on Monday could be short-lived, with little sign that Crimea's vote to secede from Ukraine would result in widespread violence. Attention in the oil markets has turned to ample global supplies and worries about a weakening demand outlook, according to analysts. "I believe Brent will face selling pressure when New York opens," said Ken Hasegawa, commodity sales manager at Newedge Japan in Tokyo. Brent crude rose 26 cents to $106.50 per barrel by 0834 GMT after dropping $1.97 to close at $106.24. The May Brent contract hit $106.16 a barrel on Monday, the lowest for a front month since Feb. 6. U.S. crude climbed 15 cents to $98.23 after dropping 81 cents to close at $98.08 per barrel. Brent is likely to remain range-bound between $105-$110 per barrel in the absence of any new, big factors to influence the market, Hasegawa said. Oil prices have also been dampened by estimates that U.S. commercial crude inventories were expected to have risen last week by more than 2 million barrels. U.S. crude inventories rose by 2.8 million barrels on average, according to a preliminary Reuters poll taken ahead of weekly data reports that are set to be released on Tuesday and Wednesday. Brent's premium to U.S. crude CL-LCO1=R, currently around $8-$9 a barrel, could narrow in the medium term to about $6 as demand for gasoline picks up for the peak summer driving season in the United States, said Tony Nunan, oil risk manager at Japan's Mitsubishi Corp. In the midst of the situation in Ukraine, the European Union has begun discussing the need to reduce its reliance on Russian energy, British Foreign Secretary William Hague said on Monday. Hague also said more names could be added to the sanctions list of 21 Russians and Ukrainians imposed by the EU, depending in part on how Russia reacted to Crimea's application to join Russia following the weekend referendum. While there had been an easing of concerns the situation in Crimea and Ukraine could turn violent, it was still early days and would depend on whether Russia pushed into the rest of Ukraine, said Nunan. Oil production in Libya is currently less than 250,000 bpd following a new protest, according to the state-owned National Oil Corp. The situation in Libya posed a bigger risk than Ukraine to the oil markets, said Nunan. "Libya could be torn apart by civil war," he said. Iran could increase production to offset any shortfall, but the United States was likely to put behind-the-scenes pressure on countries such as India to maintain purchases of Iranian oil at previous levels, Nunan added. (Editing By Tom Hogue)

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