Oil held near $109 a barrel on Friday and was heading for a weekly drop on the return of some Libyan output, a reduced prospect of military action against Syria and signals from Iran that it is looking for a thaw in relations with the West.

Persistent concern about Middle East and North African supplies, falling U.S. crude inventories and the Federal Reserve's decision this week to leave its stimulus programme unchanged supported the market.

Brent crude for November was up 18 cents to $108.94 by 1200 GMT. Earlier in the session, the benchmark had fallen over 3 percent over this week and was on track for its steepest weekly decline since mid-June. U.S. crude for October dropped 76 cents to $105.63.

"I think the big stories in the market are the improvement in Libyan exports and the containment of the Syrian war - at least for now," said Christopher Bellew, a broker at Jefferies Bache in London.

"This, combined with the speculative length in the market, will very likely lead prices lower."

Althougth Libya's production had recovered to 620,000 barrels per day (bpd) as of Wednesday after protesters agreed to reopen some oilfields, some say it is too early to dismiss the prospect of further disruption.

"Supply tightness seems to be easing but Libya's export recovery is not something that's being assured," said Sijin Cheng, an analyst at Barclays.

Libyan output had collapsed to below 200,000 bpd in a stalemate between protesters and the government that lasted more than a month. As well as Libya, significant supply remains offline in Nigeria and in southern Iraq.

World shares steadied at a five-year high on Friday, while bonds and other commodities were consolidating after the Fed's shock decision announced on Wednesday to keep its monetary stimulus intact.

Lending support to oil, U.S. crude inventories fell 4.37 million barrels last week to 356 million barrels, their lowest level since March 2012, according to data issued by the U.S. Energy Information Administration on Wednesday.

Iranian President Hassan Rouhani has sent signals that he is looking for a thaw in relations with the United States. The White House said leaders from both countries may meet next week.

Western sanctions targeting Iran's oil exports over Tehran's nuclear programme have cut Iranian crude shipments by more than half, or more than 1 million bpd, since early 2012.

"This does not mean we shall see an immediate lift to sanctions," said Andrey Kryuchenkov, analyst at VTB Capital. "However, matters are starting to look more promising."