By Florence Tan
SINGAPORE (Reuters) - Brent crude prices held steady above $108 a barrel on Friday, set for the biggest weekly decline in three months on the return of some Libyan oil output, although supply concerns remained in focus as geopolitical tensions simmered in the Middle East.
The U.N. Security Council is expected to decide next week on how it will enforce a U.S.-Russian plan to destroy Syria's chemical weapons. The United States and Iran may also meet next week to discuss Tehran's nuclear programme.
Brent crude for November delivery had slipped 6 cents to $108.70 a barrel by 0514 GMT. The crude benchmark has lost about 3.6 percent for the week and is on track for its steepest weekly decline since mid-June.
U.S. crude for October delivery dropped 23 cents to$106.16 a barrel. The contract, which expires later in the day, is down almost 2 percent this week.
"The big driver of oil markets in the last day or two has been news that Libya has restored some production capacity," said Ric Spooner, chief market analyst at CMC Markets in Sydney. "Also, the immediate Syrian risk has been unwound."
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Libya's crude oil production has recovered to 620,000 barrels per day (bpd), compared with its pre-war capacity of 1.6 million bpd, as major western fields ramped up output after protesters agreed to reopen them. Output had collapsed to below 200,000 bpd in a stalemate between protesters and the government that lasted more than a month.
"Supply tightness seems to be easing but Libya's export recovery is not something that's being assured," said Barclays analyst Sijin Cheng.
Elsewhere, Iranian President Hassan Rouhani has sent signals that he is looking for a thaw in relations with the United States, and the White House said leaders from both countries may meet next week. Western sanctions on Iran's nuclear programme have sharply reduced Tehran's oil revenues.
Fears of an imminent U.S.-led military strike on Syria abated this month after Russia and the United States struck a deal to remove chemical weapons from the war-torn country, although it was still uncertain how the plan would be carried out.
"The risk associated with Syria and Iran will remain and will continue to add a risk premium to oil markets," Spooner said. (Reporting by Florence Tan and Jacob Pedersen; Editing by Joseph Radford and Tom Hogue)