UPDATE 7-Brent oil sinks as investors reduce bets on Syria action
* President Obama to address nation about Syria on Tuesday
* U.S. lawmakers to vote on Wednesday on military strike
* Market eyes Tropical Storm Humberto
(Adds details, fresh quote. Updates prices.)
NEW YORK, Sept 9 (Reuters) - Brent crude oil futures sank more than 2 percent on Monday, as concerns of an imminent strike on Syria eased, and traders reduced positions that had reflected fears of oil supply disruption in the Middle East.
Brent crude oil sank to its lowest mark in one week, narrowing its premium over the U.S. crude oil contract which did not fall by as much.
Syria welcomed a Russian proposal to place the nation's chemical weapons under interim control, praising the Kremlin for seeking to "prevent American aggression.
"This has thrown some sand into the wheels of military preparation in the U.S.," said Michael Lynch, an oil analyst and president of consultancy Strategic Energy & Economic Research Inc in Winchester, Massachusetts. "At the very least, it means the debate is going to be stalled while we wait and see if it works out."
There is a chance now that a U.S.-led military strike could be "put on hold and possibly deterred altogether," Lynch added.
President Barack Obama will give a televised address to the nation on Tuesday, making the case for intervention.
Obama has met with resistance in the U.S. Senate as he seeks approval for military strikes against Syrian forces. U.S. Secretary of State John Kerry said Syria could avoid a strike by turning over chemical weapons.
Brent crude oil for October delivery dipped to a low of $113.55 per barrel, near the 15-day moving average of $113.47, and was last trading $2.12 lower at $114 at 12:43 p.m. EDT (1643 GMT).
Front-month U.S. crude oil futures were down 97 cents to $109.56, after falling as low as $109.26.
Brent's premium to U.S. crude oil <CL-LCO1=R> narrowed to a two-week peak of $4.21 per barrel after Brent oil prices fell to a fresh intraday low. The spread was last trading at $4.45.
U.S. oil settled at its highest price in more than two years on Friday as traders bought into a rally on fears that military action against Syria would create civil unrest throughout the Middle East, which pumps a third of the world's oil.
Assad said in an interview that a U.S. military strike would lead to retaliation in "different forms."
The global oil market is already coping with a loss of additional supplies from Libya.
POSITIVE ECONOMIC DATA
The decline in oil prices was somewhat limited by some signs of global economic recovery, which would stoke oil demand.
China's broad exports rose more than expected in August, boosted by improving demand for the country's goods in major markets.
Japan's economy expanded much faster than initially expected in the second quarter.
Rising equities broadly signal economic improvement, which would mean higher oil consumption.
"Economic news is pretty good, positive and bullish for prices but we're being overwhelmed by Syria," Lynch added.
Employment figures reported by the U.S. Department of Labor on Friday were less promising than the market expected but other data showed signs of growth in the world's largest oil consumer.
"Some of the smaller, micro data like manufacturing was better," said Bill Baruch, senior market strategist at iitrader.com in Chicago. "Outside of the jobs data, it was encouraging to oil demand overall," adding that he did not view today's price action as a "down day" but more of a market consolidation.
As well, a poll of U.S. economists said they expect the U.S. Federal Reserve to announce next week it will trim its asset purchases by $10 billion.
The Fed's monetary stimulus program has largely been seen as supporting commodity prices.
This Fed decision is already priced into the market, Baruch added. The agency would have to announce upwards of a "$20 billion" cut in order for oil prices to swing lower, he said.
The market earlier came under some selling pressure after crude oil imports by China, the world's largest buyer after the United States, hit a six-month low in August.
The market was also eyeing Tropical Storm Humberto which formed near the Cape Verde Islands on Monday and was expected to strengthen into the first hurricane of the Atlantic storm season.
A hurricane could potentially pose a threat to the oil and gas producing Gulf of Mexico, which accounts for 23 percent of total U.S. crude oil production.
(Additional reporting by Osamu Tsukimori in Tokyo and Ron Bousso in London; editing by William Hardy and David Gregorio)