NEW YORK (Reuters) - Brent crude oil edged higher on Friday, erasing losses of over $1 in a run-up in the hour before the settlement as uncertainty over negotiations between the United States and Russia over Syria's chemical weapons put investors back on edge.
Investors piled in ahead of the weekend, lifting prices and capping a session of mostly selling.
"People do not want to be short over the weekend. As optimistic as talks seem to be going, the risk is if they fall apart over the weekend," said Phil Flynn, an analyst at Price Futures Group in Chicago, Illinois.
Early losses of more than $1 in both Brent and U.S. crude indicated the market was less worried about a military strike on Syria as Russia and the United States agreed on a new push to negotiate an end to that country's civil war.
U.S. crude pared some of its earlier losses that came after weak consumer confidence and retail sales data pointed toward slower growth during the third quarter in the world's largest oil consumer.
The Brent crude futures contract for October, which expires on Friday, rose 15 cents to $112.78 a barrel, after earlier touching a session low of $111.60.
U.S. crude shed 39 cents to $108.21 a barrel, after hitting a session low of $107.23.
The spread between the two benchmarks widened to $4.57, after narrowing to $3.93 earlier in the session.
Speculators cut their net long U.S. crude oil futures and options positions for the second week in a row, government data showed. <CFTC/> The investor group had built up its second largest net long position on record at the end of August on fears of a possible U.S.-led military strike on Syria.
Brent has lost about 2.9 percent since last Friday. The international benchmark has slid about $5 a barrel since the end of August, when it jumped above $117 amid worries that a possible U.S. attack on Syria could lead to more violence in a region that pumps around a third of the world's oil.
Tensions had eased earlier this week, with U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov working to flesh out a Moscow plan to dispose of Syrian President Bashar al-Assad's chemical weapons.
Brent was on course for its first weekly decline in a month, its steepest since the week ending June 21.
Investors are focused on the U.S. Federal Reserve's policy meeting next week. The U.S. central bank is expected to begin tapering, or reducing monthly bond purchases. Weak U.S. data has analysts expecting less of a reduction than once thought.
"I think the market's going to languish here, until we start to get some insight into what the Fed's intentions are going to be," said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut.
"Right now everything seems to be up in the air, and the market's just wavering back and forth until it finds its signal to go on a new drive."
Although global oil markets remain tight, with more than 1 million barrels per day (bpd) of Libyan crude oil exports unavailable due to civil unrest and strikes, investors expect supplies to improve over the next few months.
"Oil markets are likely to be better supplied in the fourth quarter," said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt. "It's not surprising oil prices are falling as the Middle East risk premium diminishes."
Libya's state National Oil Corp has declared force majeure or its inability to honour contracts on three ports, according to a company document, following several weeks of shutdown.
Iraq's oil exports from its southern ports have slowed so far in September and may fall further until mid-October due to maintenance, according to shipping data and industry sources, tightening supply from OPEC's second-largest producer.
In addition, a processing platform in Norway's Ekofisk crude stream will be partially shut down in the next week for repairs, its operator has said, which may further delay shipments of the oil that helps set the Brent benchmark.
Additional reporting by Christopher Johnson in London, James Topham and Yuka Obayashi in Tokyo; Editing by David Gregorio and Eric Walsh