He has some pretty powerful spells. Not sure if he could match Sephiroth in battle though.
Thor would probably crush Sephy IMO.
If Sephy is jobbing, he'll lose to Thor. As for Loki's mischievous spells and reality warping. I don't think they'll have any effect. If Loki tried to cast a reality warp around Sephiroth, he'll just shatter it.
@OmegaDynasty: Been awhile since I've played the game so I don't remember the various phases that well. I think the materia vs norn stone gives a big edge to Sephiroth, but I think he would eventually take it either way. Loki can only hide behind his tricks so long.