Oil eased below $70 a barrel on Friday on expectations of a long delay before the United Nations decides on sanctions against Iran, the world's fourth-largest oil exporter.
Russia on Friday called imposing punitive sanctions on Tehran a dead end and the European Union called for more talks. Support for prices came from a fresh cut to supply in Africa's top exporter Nigeria.
"Getting excited on Iran now is a bit overdone," said Olivier Jakob of Petromatrix. "I don't see any threat to supply or further escalation at this stage. It's going to drag on."
US crude settled down $1.07 at $69.19 a barrel. London Brent fell $1.10 to $69.15.
Still, covering of short positions before the long US weekend could bolster prices, analysts said. The US market is closed on Monday for the US Labour Day holiday.
Iran faces the threat of Security Council sanctions after the UN's atomic watchdog said Tehran had refused to stop work on its nuclear programme by a deadline, which passed on Thursday.
US President George W. Bush said Iran must face consequences for failing to meet the deadline. But European Union foreign ministers on Friday called for more dialogue with Iran before any talk of sanctions.
"For the EU, diplomacy remains the number one way forward," Finnish Foreign Minister Erkki Tuomioja, whose country holds the 25-nation bloc's rotating presidency, told a news conference.
Western countries, including the United States and the European Union, fear Tehran could be trying to make atom bombs, while Iran says its intentions are peaceful.
Russia's foreign minister cast doubt on whether the UN Security Council can reach quick consensus on punitive measures against Tehran.
"We take into account the experience of the past and we cannot ally ourselves with ultimatums, which all lead to a dead end," Interfax news agency quoted Russian Foreign Minister Sergei Lavrov as saying.
Oil has also come under pressure from a weaker-than-expected hurricane season in the Gulf of Mexico, home to about a quarter of US oil production, and healthy US inventories.
A noted US hurricane research team on Friday reduced for a second time its forecast for the Atlantic hurricane season and predicted 13 tropical storms, of which five would become hurricanes.
Crude in New York, which hit a record high of $78.40 in July, touched a 10-week low of $68.65 a barrel on Wednesday after a surprise increase in US crude stocks.
"Supplies in the United States are solid, the hurricane season hasn't quite come on with the impact of last year, and the uncertainty over Iran has already been factored into the premium on oil," said Gerard Burg, minerals and energy economist at National Australia Bank.
Supporting prices, Italian energy company Eni declared a temporary suspension to its obligations to supply customers on 50,000 barrels of crude lost at its Brass River field in Nigeria after a sabotage attack late last month, a company official said on Friday.
A sixth of output capacity in Nigeria, the world's eighth-largest oil exporter, is already shut down due to a series of militant attacks on oil installations.