* Technical problems delay reopening of Libya's Zueitina oil port
* Iran, world powers to start work on nuclear drafts next month
* Brent neutral in $109.17-$110.40 range -technicals (Adds comments, updates prices)
By Manash Goswami
SINGAPORE, April 21 (Reuters) - Brent futures dropped towards $109 a barrel on Monday as investors took profits after steep gains, but uncertainty surrounding the crisis in Ukraine checked the decline.
Russia and world powers reached an agreement designed to avert a wider conflict over Ukraine, but the viability of the deal was bought into question after at least three people were killed in a gunfight near a Ukrainian city controlled by pro-Russian separatists.
Oil and broader financial markets are watching the unfolding crisis that has already made ties between Russia, the world's largest oil producer, and the West more fraught than at any time since the Cold War, raising the risks of further economic sanctions.
"The market is being supported by Ukraine although we are seeing some profit-taking coming in after the recent rise," said Ken Hasegawa, a commodity sales manager at brokerage Newedge Japan. "We may see Brent rise further by $1 to $2 a barrel if the Ukraine crisis worsens, but it will retrace as the overall market is well supplied."
Brent crude lost 39 cents to $109.14 a barrel by 0753 GMT, after rising to intraday highs of above $110 late last week for the first time since early March. U.S. crude oil futures declined 13 cents to $104.17 a barrel.
Brent gained 2 percent last week, and has risen nearly 5 percent from $104.79 a barrel, its lowest settlement for the year reached earlier this month.
"Benchmark crude prices sustained downward pressure after markets resumed from Good Friday holiday last week, mainly induced by profit-taking activities as investors waited for more directions from new geopolitical developments," analysts at Phillip Futures said in a note to clients.
Brent looks set to trade within a broad range of between $103 and $113 a barrel, caught between geopolitical risks and an improving supply outlook with expectations of higher shipments from Libya, Iran and Iraq, Hasegawa said.
The U.S. benchmark will rise towards $105 a barrel, and if it fails to break that key resistance level it will fall towards $100 a barrel, he said. Even though the contract is drawing support from an improving U.S. economy, rising U.S. production will cap gains in prices.
"Current oil supply-demand dynamics suggest a lower Brent price at the prompt," analysts at Barclays said in a note late last week. "However we think the window of time available for this downward shift in prices is closing given summer demand requirements and other supply risks on the horizon."
Oil investors are keeping an eye on the resumption of shipments from key north African exporter Libya.
SUPPLY OUTLOOK
Technical problems have delayed the reopening of Libya's eastern Zueitina oil export terminal. Two weeks ago, the government in Tripoli reached an agreement with rebels in the restive east to end an eight-month occupation of four oil ports which have halted vital exports.
Under the plan, the Hariga and Zueitina ports were due to open immediately while the larger Ras Lanuf and Es Sider terminals would resume oil exports within a month. But Hariga port, located in Tobruk in the far east, would be the only one to start operations due to technical problems at Zueitina.
Iran and world powers will begin work drafting a long-term settlement of Iran's disputed nuclear programme at expert-level talks in New York next month, the official state news agency IRNA reported on Sunday. (Editing by Himani Sarkar)
