Oil drops on profit-taking, easing Iran tensions

NEW YORK (Reuters) - Oil dropped over $4 a barrel Monday on profit taking and signals that Iran will be more flexible in negotiations over its nuclear program.

Oil received additional pressure from news Hurricane Bertha will likely avoid damaging Gulf of Mexico energy facilities.

U.S. crude settled at $141.37 a barrel, down $3.92 and below Friday's low of $143.22. Brent crude settled at $141.87 a barrel, down $2.55.

The New York Mercantile Exchange did not issue an official Friday closing price due to the July 4 holiday.

"Crude prices are down on profit-taking as the fears that brought prices up before the July Fourth holiday didn't materialize -- there was no attack on Iran and the storm Bertha does not appear to be a threat to oil production," said Phil Flynn, an analyst with Alaron Trading in Chicago.

Oil hit a record $145.85 on Thursday, but later eased as traders anticipated lessening tensions between Iran and the West after Tehran responded to a package of incentives to try to resolve the dispute.

Tehran's foreign minister Sunday expressed optimism about what he said was a "new environment" for talks.

"Iran shows signs of improved lines of communication," said Barclays Capital in a report.

But Iranian President Mahmoud Ahmadinejad said Monday Iran would not abandon its right to enrich uranium and rejected a major powers' demand to do so as "illegitimate," the official IRNA news agency reported.