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Energy Insights: Energy News: Oil falls towards $108 as Middle East tension eases

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Oil falls towards $108 as Middle East tension eases



* North Sea Brent, U.S. crude head for third weekly fall

* U.S., Russia agree on Syria resolution; U.N. to vote on Friday

* Iran, U.S. hold talks on Tehran's nuclear ambitions (Updates prices, adds Libya output latest in final paragraphs)

By Christopher Johnson

LONDON, Sept 27 (Reuters) - Brent crude oil fell towards $108 a barrel on Friday, heading for its third straight weekly decline, with diplomatic efforts over Syria and Iran helping ease worries about 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 United States and Iran also began talks to resolve a long-running standoff over Tehran's nuclear programme.

"The easing of geopolitical tensions and plentiful supply of the market give little reason for any rise in prices," said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt.

Brent crude oil for November fell 90 cents to $108.31 a barrel by 1337 GMT.

U.S. crude for delivery in November dropped 20 cents to $102.83 a barrel, falling for a sixth session out of seven and down nearly 2 percent on the week.

A Reuters poll of 32 analysts showed Brent crude is expected to average $107.70 a barrel this year.

The North Sea benchmark, which peaked above $117 a barrel in August on concerns the war in Syria would spiral out of control and hit Middle East oil output, has traded at an average of $108.49 per barrel so far this year.

Both Brent and U.S. light 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 tension 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 United States held their highest-level substantive talks in a generation on Thursday.

While a 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.

Iran's envoy to the U.N. nuclear watchdog played down the chances of a quick breakthrough in talks on Friday with the agency on Tehran's disputed atomic programme.

"This is the first meeting so nobody I guess should expect that in just (a) one-day meeting we can solve (our) problems," Reza Najafi told reporters.

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.

The supply situation in Libya was also in focus.

Libya's crude oil output has stabilised at around 650,000 barrels per day (bpd) after its western fields resumed production this month but the main eastern oil facilities remain closed, a senior National Oil Corp (NOC) official said on Friday. (Additional reporting by Jacob Gronholt-Pedersen in Singapore; editing by James Jukwey and Keiron Henderson)


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