* Cyprus risks EU exit after bailout ultimatum
* Cyprus in talks with Russia for loan, banking and energy deals
* Brent-WTI spread narrowest in more than 2 months
* Coming Up: U.S. CFTC positions data; 1930 GMT (Updates prices)
By Florence Tan
SINGAPORE, March 22 (Reuters) - Brent crude held above $107 a barrel on Friday, but was still on track for a second straight week of losses, as Cyprus scrambled to raise money to avert a financial meltdown that could disrupt the euro zone's recovery and diminish its oil demand.
Investors were on edge this week after Cyprus rejected imposing a levy on bank deposits to secure an international bailout, reviving fears of a debt crisis contagion in the euro zone. The European Union gave Cyprus until Monday to raise the money or risk exiting the currency bloc.
Brent crude for May delivery rose 23 cents to $107.70 a barrel by 0511 GMT, and looked set to post a fall of more than 2 percent this week.
U.S. crude for May was at $92.58, up 13 cents, on track to post its first weekly fall in three.
"Brent is obviously under greater pressure because it's closer to the epicentre of the issue," Jonathan Barratt, chief executive of Sydney-based commodity research firm Barratt's Bulletin said, adding that Europe's oil demand would be conditional on the outcome of the Cyprus issue.
On Thursday, Cypriot Finance Minister Michael Sarris held a second day of talks with Russia about a loan to solve its debt crisis and on cooperation in the banking and energy sectors.
Adding to the uncertainty in Europe, the region's economic downturn deepened in March -- even before the Cyprus crisis became acute -- data from survey compiler Markit showed.
NARROWER BRENT-WTI SPREAD
Jitters in the euro zone, improved North Sea crude supply
and an easing of the oil glut at Cushing, Oklahoma, have helped
pull Brent's premium to U.S. crude futures
"It only makes sense that the spread come in," Barratt said.
More cargoes of North Sea Forties crude are likely to have their loading dates brought forward due to strong output, trade sources said on Thursday, boosting supply of the oil that sets the global Brent benchmark.
In the United States, crude stocks at Cushing fell 286,000 barrels last week while economic indicators such as jobless claims and housing data pointed again to a steady U.S. recovery.
At the same time, geopolitics continued to underpin the oil markets and limited losses.
Russia said on Thursday that Iran and six global powers made progress in expert-level talks this week to ease the standoff over Tehran's nuclear program, but noted there was no breakthrough and said the risk remained that the talks could unravel.
More rhetoric came from Iran as its Supreme Leader Ayatollah Ali Khamenei warned that the Islamic Republic would destroy the Israeli cities of Tel Aviv and Haifa if its nuclear infrastructure came under attack from the Jewish state.
Worries the standoff between the West and Iran will escalate and disrupt oil supplies have kept Brent above $100 a barrel through most of 2012 and this year, despite weak demand. (Editing by Clarence Fernandez)