Oil prices slide in poor start to week

London - World oil prices fell sharply on Monday, handing back pre-weekend gains on easing supply worries in both Ukraine and Iraq, dealers said.

US benchmark West Texas Intermediate (WTI) for delivery in September dropped $1.01 to $96.34 a barrel.

Brent North Sea crude for October sank $1.25 to $102.28.

The oil market had surged late on Friday after Kiev said that Ukrainian forces had destroyed part of a Russian military convoy that entered its territory.

"It became apparent on Friday just how nervously the market reacts to geopolitical risks: reports of the alleged destruction of an armed Russian convoy by Ukrainian troops on Ukrainian territory pushed Brent up by one US dollar," said Commerzbank analyst Carsten Fritsch.

"Over the weekend, the reports turned out to be false, and Brent has shed most of these gains at the start of the week, now trading at well below $103 a barrel again."

News of the shelling sent stock markets tumbling and pushed up oil prices on Friday as investors feared direct conflict could break out between Ukraine and Russia, the world's second-largest oil producer.

Russia said on Monday that "certain progress" was made at Ukraine crisis talks in Berlin between the two countries' foreign ministers and their counterparts from Germany and France.

Investors fear a full-blown military conflict between the two neighbours will disrupt Russian energy exports to Europe, particularly as Ukraine is a major conduit for Russian gas.

Elsewhere, traders eyed easing market concerns over ongoing unrest in key Opec crude producer Iraq.

Kurdish officials said their fighters, backed by US warplanes, have retaken the country's largest dam from jihadists, as the United States and Britain step up their military involvement.

The recapture of Mosul dam marks the biggest prize yet clawed back from Islamic State (IS) jihadists since they launched a major offensive in northern Iraq in early June, sweeping Iraqi security forces aside.

IS militants, who have declared a "caliphate" straddling vast areas of Iraq and Syria, also came under air attack in their Syrian stronghold of Raqa on Sunday, a monitoring group said.