UPDATE 7-Oil falls in NY and London on Iran president comments
* Libya oil output up near 40 pct of pre-war level
* U.S. crude inventories fall to lowest since March 2012
(Updates prices, changes byline, previous LONDON)
NEW YORK, Sept 19 (Reuters) - Oil slipped on Thursday after Iran's president said his country was not seeking war with any other nation, helping unwind a risk premium and foster speculation of a recovery in oil exports to the West.
The prospect of a flood of Middle Eastern oil into the global market depressed oil prices, even as other commodities and equities rose after the United States Federal Reserve surprised markets by deciding it would keep its monetary stimulus program intact.
Brent crude for November delivery fell 70 cents to $109.90 a barrel by 11:12 a.m. EDT (1512 GMT), while U.S. crude was down 26 cents at $107.81.
The contract for U.S. crude for October delivery expires Friday.
Libya's crude oil production has recovered to nearly 40 percent of its pre-war capacity, officials said on Wednesday with exports set to rise as major western fields ramped up ouput to 620,000 barrels per day (bpd) after protesters agreed to reopen them.
"There's a growing realization with the Libyan barrels back on the market and the potential for Iranian oil to come back that we're going to see the international benchmark come under pressure," said John Kilduff, a partner at Again Capital LLC in New York, adding that Saudi Arabia's production was at near-record levels as well.
Brent and U.S. oil both posted their biggest rise in three weeks in the previous session as the Federal Reserve's decision to delay the wind-down of its massive monetary stimulus weakened the dollar and stoked demand for risky assets.
Early gains from oil were erased, however, after new Iranian President Hassan Rouhani vowed on Wednesday his government would never develop nuclear weapons, his strongest signal yet that he may be seeking a diplomatic thaw with the West after decades of acrimony.
"Crude oil has to trade between Fed relief and Iranian belief," said Olivier Jakob, analyst at Petromatrix in Zug, Switzerland.
A more conciliatory tone from Iran has kindled hopes that sanctions on its oil, previously OPEC's biggest after Saudi Arabia, will be eased, improving the global supply picture.
Easing fears of a U.S.-led military strike on Syria also helped to dampen prices, with Western powers meeting for a second day of talks on their draft resolution on eradicating Syria's chemical arsenal.
Low stockpiles in the United States also supported the U.S. crude price.
Crude inventories in the U.S. fell last week to their lowest since March 2012, data from the Energy Information Administration showed on Wednesday, posting a larger-than-expected drop of more than 4 million barrels.
Brent's premium to U.S. crude for November delivery <CL-LCO1R> traded at less than $3, compared to $9 on September 2.
(Additional reporting by Simon Falush in London; Editing by Leslie Gevirtz)