Array

TOKYO, Sep 5 (Reuters) London crude oil prices bounced back above $68 a barrel on Tuesday after slumping to a more than 10-week low the day before, with many dealers moving to the sidelines to await the next step in Iran's atomic standoff.

Brent crude for October delivery traded up 39 cents, or 0.58 percent, at $68.10 a barrel after dropping $1.44 on Monday. It fell as low as $67.59, the weakest since June 21.

U.S. light sweet crude stood at $68.37, down 83 cents from Friday, but recovering from Monday's intra-day low of $67.77, the lowest since May 22.

The New York Mercantile Exchange (NYMEX) traded electronically on Monday but did not set an official closing price as the trading floor was shut for Labor Day.

Prices extended a month-long slump on Monday as dealers downgraded the risk of a disruption to Iran's crude exports -- the fourth-largest in the world -- amid additional diplomatic efforts to convince Tehran to halt uranium enrichment.

U.N. Secretary-General Kofi Annan on Monday called for a peaceful end to the OPEC producer's nuclear standoff, although he said Tehran had insisted it would not halt uranium enrichment before any talks.

Iran had already failed to meet an Aug. 31 deadline to halt its enrichment programme or run the risk of U.N. sanctions, but the European Union has engaged in a last round of negotiations in an effort to avert punitive action favoured by the United States.

Germany said on Monday that if talks between the EU's foreign policy chief and Iran's top nuclear negotiator failed to persuade Iran to change its behaviour, further negotiations would be pointless and Security Council action would have to be considered.

An EU diplomat said the Iran and EU officials had tentatively agreed to meet in Vienna on Wednesday.

''The market has not seen clear signs about the Iranian issues.

Crude should trade in a range around $67-$68 as long as the Iran disputes drag on,'' said Tony Nunan, the manager at the Mitsubishi Corp.'s risk management unit.

U.S. crude has slumped 11 percent in about a month and now stands more than $10 below its record high from mid-July, dragged down by growing U.S. oil inventories at the end of the driving season and a thus-far weaker than expected hurricane season.

The sixth tropical depression of the 2006 season was drifting far east of the Lesser Antilles on Monday, with little expections of strengthening in the next 24 hours, the U.S. National Hurricane Centre said. Most weather models showed it heading for the eastern United States and Florida.

The six-month hurricane season to November has only seen one, brief, hurricane so far this year, prompting some traders to unwind a premium they had placed on prices after last year's hurricanes Katrina and Rita wrecked oil facilities in the Gulf of Mexico, sending prices above $70 for the first time.

REUTERS CS DB1221