RTRS:UPDATE 3-Brent slips to $108 as U.S. government begins shutdown
* U.S. shutdown starts after budget talks fail
* Weak China manufacturing data adds to economic worries
* Iran to meet P5+1 in mid-October for nuclear talks (Updates previous SINGAPORE)
By Peg Mackey
LONDON, Oct 1 (Reuters) - Brent crude eased to $108 a barrel on Tuesday, near a seven-week low, on worries that a shutdown of the U.S. government will crimp oil demand, while easing tensions in U.S.-Iran nuclear talks boosted prospects for rising supply.
The U.S. government began a partial shutdown on Tuesday for the first time in 17 years, potentially putting up to 1 million workers on unpaid leave, closing national parks and stalling medical research projects.
But analysts expect that a swift resolution will limit the downside in oil prices.
"As yet, the markets have barely reacted to the breakdown of budget negotiations in the U.S. last night and the resulting partial shutdown of public institutions," Commerzbank said.
"An early resolution of the problem is evidently still expected, so there will be only limited fallout for the demand for oil in the country consuming the most worldwide."
Brent crude fell 40 cents to $107.97 a barrel by 0934 GMT. U.S. crude was at $102.17, down 16 cents.
Oil has come under downward pressure in the past month as supply has improved, with Libya ramping up output while tensions over Syria and Iran have eased.
In China, weaker-than-expected growth in the manufacturing sector in September added to concerns that a nascent recovery in the world's second-largest economy might be foundering.
Signs of a thaw in relations between the United States and Iran also weighed on oil prices.
U.S. President Barack Obama and new Iranian President Hassan Rouhani spoke by telephone last week in the highest level contact between the countries in more than three decades, fuelling hopes for a resolution of Iran's decade-old nuclear standoff with the West.
The world's six major powers will meet Iranian officials in Geneva on Oct. 15-16 to discuss Iran's nuclear programme.
Investors are also looking ahead to U.S. oil inventories data on Wednesday. The U.S. Energy Information Administration (EIA) said it has enough resources to operate to around Oct. 11 in the event of a government shutdown.
U.S. commercial crude oil inventories were forecast to have risen last week and gasoline stockpiles to have fallen, a preliminary Reuters poll of five analysts showed. (Additional reporting by Florence Tan in Singapore; Editing Jane Baird)
