* Oil supply grows, demand limited - IEA * German analyst/investor sentiment falls in November * Threat-focused Iran starts air drills * Coming up: API oil data 4:30 p.m. EST Wednesday By Robert Gibbons and David Sheppard NEW YORK, Nov 13 (Reuters) - Brent crude oil fell for a second day on Tuesday over concerns about lower demand in a well-supplied market and as the United States and Europe grappled with fragile economies. Oil prices came under pressure from an International Energy Agency report that cut estimates for global oil demand in the last three months of this year and for growth in 2013. The IEA also said Iran's production and exports had rebounded in October, despite Western sanctions, adding to the amount of crude oil in the market. "What we can see now is that the market is well supplied," IEA Executive Director Maria van der Hoeven told the annual "Oil & Money" conference in London. At the same event, OPEC Secretary General Abdullah al-Badri agreed: "There is no shortage anywhere in the world." Brent crude for December delivery closed down 81 cents to settle at $108.26 a barrel, having fallen to a low of $107.38 during the session. U.S. December crude settled down 19 cents at $85.38 a barrel, having slipped after rising to $85.95 earlier in the session. While U.S. crude futures seesawed during the session, Brent's steeper slide was attributed to news that Nexen Inc's Buzzard oil field in the North Sea came back on line Monday after a power outage briefly halted production at the weekend. More pressure came from an unexpected fall in German analyst and investor sentiment in November as the euro zone's debt crisis drags on Europe's largest economy. While the gloomy German sentiment reading helped push European shares lower, equities on Wall Street turned higher soon after the open as strong results from home-improvement giant Home Depot overshadowed concerns about U.S. tax increases and automatic spending cuts in January. "The Buzzard resumption, weak German data and overall euro zone worries pressuring the euro have helped put more pressure on Brent," said John Kilduff, a partner at hedge fund Again Capital LLC. Brent's premium to U.S. crude fell back below $23 a barrel on Tuesday after reaching $23.78 during the session but not threatening Monday's $24.02 intraday peak. The spread hit a 12-month peak of $24.33 on Oct. 29, then contracted to $20.10 on Nov. 5 before widening again. Prices around the U.S. oil futures delivery hub of Cushing, Oklahoma, have been under pressure from a planned overhaul of the largest crude unit at the giant BP refinery in Whiting, Indiana. The 337,000 barrel per day BP plant normally sources crude supplies from Cushing. U.S. RBOB gasoline and heating oil futures also slipped. The U.S. Energy Department's decision to tap 100,000 barrels of strategic diesel reserves in the wake of Superstorm Sandy, announced late on Friday, saw heating oil prices fall for a second day, sliding by around 4 cents a gallon to settle near $2.96 a gallon. Brent and U.S. crude, gasoline and heating oil futures all sat below their 50-, 100- and 200-day moving averages, technical levels monitored by chart watchers. Weekly U.S. oil stocks data from the American Petroleum Institute (API) and the U.S. Energy Information Administration (EIA) has been delayed by one day to Wednesday and Thursday respectively after government offices were closed for the Veterans Day holiday on Monday. Brent prices have stayed over $100 through most of this year despite a weakening demand outlook, touching a high of $128 in March on worries of a disruption in supply from the Middle East as tension rose over Iran's disputed nuclear program. Iran unveiled new missile and artillery systems on Tuesday, Iranian media reported, on the second day of large-scale military exercises which officials said were aimed at sending a warning to those threatening the Islamic Republic Tension also remained high on the Golan Heights, where Israeli gunners have retaliated against stray Syrian mortar fire landing on the occupied plateau in the previous two days. France became the first European power to recognize Syria's new opposition coalition as the sole representative of its people and said it would look into arming rebels against President Bashar al-Assad once they form a government.