UPDATE 7-Brent edges lower, Iran diplomacy in focus
* Obama pledges diplomacy with Iran; no Rouhani meeting
* Iraq boosts oil output, Libya ramps up exports
* EIA data shows a build of 2.6 mln barrels in crude stocks
By Anna Louie Sussman
NEW YORK, Sept 25 (Reuters) - Crude oil prices edged lower in choppy trading on Wednesday as comments from the Iranian foreign minister revived hopes that talks over Tehran's nuclear program could see progress, and as U.S. crude oil inventories posted a large build.
A report that Iran's foreign minister wanted a "jump-start" to negotiations sent Brent tumbling. Earlier, Brent climbed as market participants expressed disappointment that U.S. and Iranian leaders failed to meet or shake hands at the United Nations on Tuesday.
"We're in this cycle where the market keys off of positive or negative developments on solving the Iranian problem," said John Kilduff, partner at Again Capital LLC in New York.
U.S. crude, also known as West Texas Intermediate (WTI), fell in choppy trading. Prices seesawed back and forth after the U.S. Energy Information Administration released its weekly inventory data showing a 2.6 million barrel build in domestic crude inventories.
Brent crude oil futures fell 32 cents to $108.32 a barrel. Earlier, Brent rose more than $1 to reach a session high of $110.09.
U.S. crude fell 47 cents to $102.66 a barrel in a fifth day of losses. On Tuesday, U.S. crude hit a seven-week low.
Brent's premium over U.S. crude stood at $5.66 at the close, after widening out to $6.31, a move of more than $3 since the spread dipped below $3 on Sept. 20.
"I think it's down to the Brent-WTI spread getting a little ahead of itself. I expect there's some profit-taking here as we head into the close," said Addison Armstrong, senior director of market research at Tradition Energy in Stamford, Connecticut.
A rebound in supplies from Iraq and Libya and an assurance by Saudi Arabia's oil minister that the market has enough supply pressured prices, investors said.
"There is more oil coming from Iraq and Libya and a high level of Saudi output," said Christopher Bellew, oil trader at Jefferies Bache.
"There is also a lot of speculative length in the market that has not been shaken out yet."
Iran has agreed to talks on its nuclear program with top diplomats from six world powers on Thursday, including U.S. Secretary of State John Kerry, strengthening expectations that Tehran's relations with the United States could thaw.
Distrust between the two sides was evident when a simple handshake could not be arranged between U.S. President Barack Obama and Iran's President Hassan Rouhani on the sidelines of the U.N. General Assembly.
Rouhani told CNN he did not meet Obama at the General Assembly because the two sides "didn't have sufficient time to really coordinate the meeting".
Oil supply has improved as Iraq boosted output from its southern oilfields after repairing a leaking pipeline, although planned work continued to affect exports from OPEC's No. 2 producer.
Saudi Arabian Oil Minister Ali al-Naimi further allayed supply fears when he said the market had enough supply and prices were at a favourable level, affirming the willingness of the world's top crude exporter to meet shortages.
Libya also ramped up oil exports this week, with several tankers loading or fixed to load, after the country's western oil fields reopened following strikes by a combination of armed groups, oil workers, federalists and local activists.
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