Brent crude slipped below $114 on Friday as supply worries eased on a possible release of oil reserves by the US while Israeli comments on Iran reduced fears of a potential conflict in the Middle East that could disrupt exports.

News that the White House is 'dusting off old plans' for a potential reserve release helped benchmark contracts come off the previous session's three-month highs.

The European benchmark has risen more than a third in less than two months from the year's low at $88.49, as worries grow about a conflict over Iran's disputed nuclear programme. That increase may have been excessive, and the current fall may be a correction to bring prices to an equilibrium.

Brent crude fell $1.33 to $113.94 a barrel by 0631 GMT. The September contract which expired on Thursday ended at the highest since May 2. U.S. oil slipped 44 cents to $95.16, after settling up $1.27.

'The news of the release in stocks is partly making prices come off. I think around $100 a barrel is reasonable for both producers and consumers,' said Caren Seren Varol, a risk manager at Global Risk Management.

'Prices also got a bit ahead of themselves, so the pull back we are seeing now is a correction to the fast rise.'

US officials will monitor market conditions over the coming weeks, watching whether gasoline prices fall after the September 3 Labor Day holiday, in line with usual practice, a source with knowledge of the situation said.

The US has not yet held talks with international partners about a co-ordinated move. The source noted that Britain, France, Germany and other partner nations in the Paris-based International Energy Agency (IEA) had been receptive to a potential release a few months ago when conditions were similar.

The possible release of reserves 'would definitely be the reason for the active Brent this morning,' said Ben Le Brun, a Sydney-based market analyst at OptionsXpress. 'This is not bad news for global growth, since it will allow for more development and generally better the world economy.'

Investors, however, have yet to take the US plan more seriously for Brent prices to ease significantly, according to analysts at ANZ.

'If investors start to take the US plans more seriously we could see prices ease, especially in WTI, and Brent could head towards $113,' analysts at ANZ said in a note.

Brent is poised to rise about one per cent for the week, gaining for five out of the past six weeks. The US contract is set to gain 2.5 percent, the most in a month.

Prices were also dampened by easing concerns of a supply disruption from the Middle East after Israeli President Shimon Peres downplayed the prospect of a unilateral strike on Iran.

Peres said on Thursday he trusted President Barack Obama's pledge to prevent Tehran from producing nuclear weapons.
Peres' comments appeared to challenge Prime Minister Benjamin Netanyahu and Defence Minister Ehud Barak, who have both raised the prospect of a unilateral Israeli strike. Investors, however, remain worried the situation may escalate.

'There are still tensions in the Middle East and that is something the markets are constantly aware of and focused on,' said Le Brun. 'Barring a lack of news coming out of the region, prices can be set to remain stable.'

Capping further losses were comments by German Chancellor Angela Merkel voicing support for ECB President Mario Draghi's crisis fighting strategy, and pressing her European partners to move swiftly towards a closer integration of fiscal policies.

Investors are now looking for indications on whether the U.S. Federal Reserve will initiate more measures to stimulate growth, with data still suggesting that the world's biggest economy hasn't reached a stage of steady recovery.

'Markets are waiting to see if the Fed will announce another round of monetary easing at its upcoming meet,' Varol said.

'The Fed will probably wait for another round of employment numbers because the data so far has been mixed. There is no point in injecting more money when there is no demand for the money.'-Reuters