Oil Steadies at $107 After Iran Talks Extended

Iran nuclear talks extended, pressure for deal intensifies; U.S. accuses Russia of complicity in shooting down flight MH17

Brent crude oil steadied around $107 a barrel on Monday after big powers extended talks with Iran and eased sanctions on the Islamic republic slightly, opening up the possibility of an eventual deal and higher Iranian oil sales.

Iran and six world powers failed to meet a July 20 deadline for a settlement over Tehran's nuclear activities, but held out hope of an agreement by extending the negotiations for four months.

The world powers also agreed to let Iran access another $2.8 billion of its cash frozen abroad during the four-month period, although most sanctions on the Islamic Republic remained.

"Sanctions will remain lifted, meaning that Iran is still allowed to export a certain amount of crude oil ... this is what is pressuring the market lower," said Tamas Varga, analyst at oil brokers PVM in London.

Brent was down 25 cents to $106.99 a barrel by 1050 GMT, while U.S. oil for August delivery was down 3 cents at $103.10 per barrel.

Traders also kept an eye on the crisis between Moscow and the West after the downing of a civilian airliner in Ukraine which pushed up oil prices last week.

Investors seemed reluctant to build a higher risk premium into oil prices, with the risk of supply disruptions from Russia looking limited for the time being, analysts said.

U.S. Secretary of State John Kerry laid out on Sunday what he called overwhelming evidence of Russian complicity in the shooting down of Malaysia Airlines flight MH17.

But President Vladimir Putin so far appears unconcerned about increasing pressure that could lead to further sanctions against one of the world's top oil producers.

Hans van Cleef, senior energy economist at ABN Amro in Amsterdam, said investors were "rebalancing" the risk premium.

"We don't see an escalation of the whole Russia tensions leading towards oil or gas export disruptions," van Cleef said.

Easing worries over Iraq oil supplies and weak physical demand from refiners struggling with low processing profits have contributed to a drop of more than 7 percent in oil prices since a peak above $115 a barrel last month.

But pressure on oil will continue in the long term as a modest rise in demand is balanced by supply, van Cleef said.

Libya also remained in focus after heavy fighting between militias erupted around Tripoli airport on Sunday.

Libya's output reached around 555,000 barrels per day last week, despite a slight reduction in output at the El Feel oilfield.

By Rowena Caine and Jacob Gronholt-Pedersen