Brent crude oil fell to around $112 a barrel on Friday as the U.S. and Russian foreign ministers met in Geneva to work out a deal to avert a Western military strike on Syria, easing fears of a wider war in the Middle East.
Expectations of an imminent U.S. attack on Syria helped push Brent above $117 at the end of August as investors worried the conflict would affect the huge oil exporters of the Gulf, which pump around a third of the world's oil.
But tensions have eased over the last few days and U.S. Secretary of State John Kerry and Russia's Sergei Lavrov are trying to flesh out a Moscow plan to dispose of Syrian President Bashar al-Assad's chemical weapons.
Although global oil markets remain tight, with more than 1 million barrels per day (bpd) of Libyan crude oil exports unavailable due to civil unrest and strikes, investors expect supplies to improve over the next few months.
"Oil markets are likely to be better supplied in the fourth quarter," said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt. "It's not surprising oil prices are falling as the Middle East risk premium diminishes."
The benchmark Brent crude futures contract for October , which expires on Friday, was down 25 cents at $112.38 a barrel by 1130 GMT. U.S. crude fell $1.29 to a low of $107.31, before recovering to trade around $107.80.
Brent was on course for its first week of losses in a month, down around 3.5 percent since last Friday, its steepest since the week ending June 21.
"We think Brent should be trading between $100 and $110 if you remove the risk premium from the price," Fritsch said.
But the oil market is still tight without supply from Libya. Its state National Oil Corp has declared force majeure or its inability to honour contracts on three ports, according to a company document, following several weeks of shutdown.
In addition, a processing platform in Norway's Ekofisk crude stream will be partially shut down in the next week for repairs, its operator has said, which may further delay shipments of the oil that helps set the Brent benchmark.
Investors awaited U.S. data on Friday, including producer inflation and retail sales, for more signals on whether the Federal Reserve will begin unwinding its long-standing monetary stimulus this month.
The U.S. central bank is expected to reduce its $85 billion a month bond-buying programme at its two-day policy meeting that ends on Sept 18. But recent weaker-than-expected data intensifies uncertainty about the extent of any reduction.