Oil Slips on Easing Mideast Tension

CommoditiesReuters

Brent crude dropped below $109 a barrel on Friday and was heading for its third straight weekly loss, as fading worries over Syria and Iran helped ease risks to supply from the Middle East.

The United States and Russia have agreed on a draft U.N. Security Council resolution aimed at eliminating chemical weapons in Syria. The U.S. and Iran also began talks to resolve a long-running standoff over Tehran's nuclear programme.

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"The geopolitical risk has been unwound a bit, but it's still reflected in oil prices," said Ric Spooner, chief market analyst at CMC Markets. "The most likely scenario is that prices will come down further."

Brent crude for November delivery touched a session low of $108.88 a barrel, before paring losses to trade at $109.12 a barrel by 0406 GMT, off 9 cents. It was down 0.1 percent for the week.

U.S. crude for delivery in November dropped 33 cents to $102.70 a barrel, falling for a sixth session out of seven and down nearly 2 percent on the week.

Both Brent and West Texas Intermediate crude have shed nearly $8 a barrel from peaks hit earlier this month, with geopolitical risks in the Middle East dissipating led by the diplomatic resolution on Syria's chemical arsenal. The U.N. Security Council will vote on the resolution later on Friday.

Although Syria is not a major oil producer, any escalation of tensions in the Middle East could disrupt flows from a region that supplies nearly a third of the world's oil.

There is also growing progress between the West and Iran over the latter's nuclear ambitions, which had prompted sanctions against Tehran. Iran and the U.S. held their highest-level substantive talks in a generation on Thursday.

While the recent charm offensive by new Iranian President Hassan Rouhani has calmed some oil investors, analysts say increased Iranian crude exports are unlikely to happen any time soon.

"The path to a lasting diplomatic deal that will lead to Iranian barrels returning to the market remains quite perilous," Barclays analyst Helima Croft said in a note.

The West's standoff with Iran over the OPEC nation's nuclear programme has helped support oil prices for nearly a decade. Years of sanctions have cut Iranian oil exports by more than 1 million barrels per day.

(Reporting By Jacob Gronholt-Pedersen; Editing by Manolo Serapio Jr. and joseph Radford)