(Refiles to add 'UPDATE 1' to headline)
* Recasts with 1 pct price drop
* Analysts warn of limited spare capacity
* Hedge funds cut bullish crude futures positions
* U.S. oil drilling stalls: https://tmsnrt.rs/2IK63ET
By Henning Gloystein
SINGAPORE, Oct 8 (Reuters) - Brent crude oil prices fell by more than 1 percent on Monday after Washington said it may grant waivers to sanctions against Iran's oil exports next month, and as Saudi Arabia was said to be replacing any potential shortfall from Iran.
International benchmark Brent crude oil futures LCOc1 were at $83.25 per barrel at 0115 GMT, down 91 cents, or 1.1 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were down 57 cents, or 0.8 percent, at $73.77 a barrel.
U.S. sanctions will target Iran's crude oil exports from Nov. 4, and Washington has been putting pressure on governments and companies worldwide to cut their imports to zero.
However, a U.S. government official said on Friday that the country could consider exemptions for nations that have already shown efforts to reduce their imports of Iranian oil. funds cut their bullish wagers on U.S. crude in the latest week to the lowest level in nearly a year, data showed on Friday. weighing on prices, Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore, said there was also "chatter that Saudi Arabia has replaced all of Iran's lost oil".
But Innes warned that limited spare production to deal with further supply disruptions meant "the capacity is quickly declining due to Asia's insatiable demand".
The U.S. oil drilling rig count fell for a third consecutive week, as rising costs and pipeline bottlenecks have hindered new drilling since June. cut two oil rigs in the week to Oct. 5, bringing the total count down to 861, energy services firm Baker Hughes said in its weekly report on Friday. RIG-OL-USA-BHI
That is the longest streak of weekly cuts since October last year.
With Iran sanctions still on the table, potential spare capacity constraints and also a slowdown in U.S. drilling, U.S. bank J.P.Morgan said in its latest cross-asset outlook for clients that it recommended to "stay long Jan '19 WTI on supply risks to crude".
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https://tmsnrt.rs/2OJ4k8l
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