UPDATE 5-Oil falls below $110 on Syria, Libyan output
* Crude falls further after sharpest drop in almost 3 months
* Easing tensions over Syria reduce risk premium
* Big western Libya oilfield set to resume production
* Fed tapering seen likely, may hurt oil prices further
* Coming up: U.S. API oil inventories report at 2030 GMT
(Updates detail, prices)
LONDON, Sept 17 (Reuters) - Brent crude fell below $110 a barrel on Tuesday as a deal averting any imminent U.S. attack on Syria calmed fears of a disruption to Middle East oil supplies and after output resumed at a large oilfield in western Libya.
U.S. air strikes on Syria now look unlikely after the pact to remove Syria's chemical weapons, although the United States, Britain and France have warned President Bashar al-Assad of consequences if he fails to comply.
Oil supplies from Libya, hit this year by unrest and strikes, are set to recover after the government in Tripoli agreed a deal with protesters in the country's west to allow pumping to resume from one major oilfield.
Investors are also wary over the market outlook ahead of a meeting of the U.S. central bank, which is likely to signal tighter monetary policy and could strengthen the dollar.
"This Federal Reserve meeting is the most interesting for at least a year because it could mark the exit from ultra-loose monetary policy," Commerzbank senior oil and commodities analyst Carsten Fritsch said.
"The market believes the U.S. dollar will strengthen if monetary conditions are tightened, which would put some pressure on oil," he added.
Brent crude for delivery in November fell $1 a barrel to $109.07 and traded around $109.20 by 1255 GMT, after touching a near-one-month low of $108.73 in the previous session.
The benchmark slid 2.4 percent on Monday, its steepest one-day decline since June 20, after the deal to strip Syria of chemical weapons.
U.S. crude for October delivery was down 60 cents at $105.99 a barrel, after hitting a session low of $105.59, its weakest since Sept. 3.
Brent has lost more than 6 percent since hitting a six-month peak of $117.34 in late August when a U.S. military strike against Syria appeared imminent.
Libyan oil output is expected to rise to 400,000-450,000 barrels per day (bpd) as one of the biggest western oilfields, El Sharara, ramps up after workers resumed pumping on Monday, deputy oil minister Omar Shakmak said.
Oil production in Libya is still far below its pre-war level of 1.6 million bpd, but officials say output from other oilfields could resume soon.
Libyan Prime Minister Ali Zeidan said on Tuesday he wanted to solve the crisis in the oil industry through dialogue:
"We are going to work on solving this problem," Zeidan told a conference in London. "When blood is shed, the loss will be greater".
The Fed begins a two-day meeting on Tuesday and is expected to cut its monthly $85-billion bond purchases by at least $10 billion as it begins to close the era of cheap money that has boosted the flow of funds into commodities.
"If our assessment is correct, the dollar could strengthen in the wake of the tapering announcement, followed by more selling in commodities," INTL FCStone analyst Ed Meir said.
Investors also awaited U.S. oil inventories data from the American Petroleum Institute (API) industry group at 2030 GMT, and the U.S. Energy Information Administration due on Wednesday at 1430 GMT.
A Reuters survey of analysts suggested U.S. commercial crude oil stockpiles fell last week by around 1.4 million barrels, while distillate inventories probably rose slightly.
(Additional reporting by Manolo Serapio in Singapore; Editing by William Hardy and Dale Hudson)