By Seng Li Peng
SINGAPORE (Reuters) - Brent fell below $109 on Tuesday after posting its largest gains in a month in the previous session as investors took profits and watched keenly to see how Europe would tackle its debt crisis at a meeting later in the day.
At the meeting, euro zone finance ministers are expected to approve detailed rules for the region's 440 billion euro bailout fund to help attract cash from private and public investors to its co-investment funds.
Brent crude fell 31 cents to $108.69 by 0804 GMT, after posting gains of more than 2 percent in the previous session -- its biggest single day rise in a month.
"Oil prices coming off could be also be due to some profit taking," Natalie Robertson of ANZ said of the day's earlier losses. "But I think the market tonight will be more focused on developments out of Europe and that would offset any changes in supplies."
The euro zone's debt crisis has become the biggest threat to the global economy and a break up of the currency zone can no longer be ruled out, the Organisation for Economic Cooperation and Development said on Monday, slashing its forecasts and urging the European Central Bank to play a bigger role in defusing the crisis.
The euro zone has already entered a mild recession but much worse could follow unless policy makers take decisive action to get ahead of the market, it added.
U.S. crude fell 80 cents to $97.41 a barrel after gaining more than one percent on Monday, weighed down by Fitch Ratings' revision of the U.S. credit rating outlook to negative and expectations for an increase of 1.0 million barrels in domestic crude stocks.
The ratings agency gave the United States until 2013 to come up with a credible plan to tackle its ballooning budget deficit or risk a downgrade of the country's coveted AAA rating.
SYRIA, IRAN
While Europe will play a key role in influencing prices, sanctions against Syria and Iran over human rights violations and a nuclear program, respectively, are expected to support oil prices.
"Oil prices will be supported because there are geopolitical tensions over Iran's nuclear program. That would provide a floor for prices," Robertson said.
Paris has argued that Europe should ban Iranian oil as part of Western steps to ratchet up pressure on the country, following a report by the International Atomic Energy Agency that suggested Iran had worked on designing an atom bomb.
Diplomats say EU powerbrokers Britain and Germany support the proposal, although London is still doing an analysis of the costs. But some EU states, led by crisis-stricken Greece, have expressed concerns about the economic impact of an oil embargo.
Separately, Syria faces growing economic sanctions and condemnation over what the United Nations calls "gross human rights violations", but President Bashar al-Assad shows no sign of buckling under pressure to end his military crackdown on popular unrest.
China and Russia have oil concessions in Syria. Moscow also has a naval repair base on Syria's Mediterranean coast and announced on Monday that it was sending warships there, in an apparent display of determination to defend its interests.
"Syria and Iran are bullish factors, but so far there have been no disruptions. If some disruptions were to take place, that can push the prices up by $5 to $10," said Ken Hasegawa, commodity derivatives manager at Newedge Brokerage in Tokyo, said.
