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Brent falls after gains on Monday

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Iran says retaliation may be avoided

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U.S. beefs up naval forces in Mediterranean

(Updates with settlement prices, paragraph 2)

By Erwin Seba

HOUSTON, Aug 13 (Reuters) - Brent and U.S. crude oil

futures fell on Tuesday as traders grew less nervous about the

potential for a wider war in the Middle East, with Iran yet to

act on threats to retaliate on Israel for assassination of a

Hamas official in Tehran.

Benchmark Brent crude futures settled down $1.61, or

1.96% at $80.69 a barrel. U.S. West Texas Intermediate crude

finished down $1.71, or 2.14%, at $78.35 a barrel.

"The markets had priced in an imminent attack by Iran

against Israel within 24 to 48 hours," said Phil Flynn, senior

analyst at Price Futures Group. "That hasn't happened. The

market is taking that risk premium out of the price for crude."

The International Energy Agency kept its 2024 global oil

demand growth forecast unchanged but trimmed its 2025 estimate,

citing the impact of lacklustre Chinese consumption on economic

growth.

Brent on Monday gained more than 3%, closing at $82.30 a

barrel after hitting the lowest closing price in seven months,

$76.30, a week earlier.

Also on Monday, the Organization of the Petroleum Exporting

Countries cut expected demand in 2024 even though the group and

its allies, known as OPEC+, aim to raise output from October.

Escalation in the Middle East could endanger crude supply

from a leading oil-producing regions, but wider war seemed less

likely as Iran suggested renewed cease-fire talks with Hamas

could prevent retaliation.

"We're seeing evaporation of the geopolitical risk premium,"

said Jim Ritterbusch, president of Ritterbusch Associates.

The U.S. has prepared for what could be significant attacks

by Iran or its proxies in the region as soon as this week, White

House national security spokesperson John Kirby said on Monday.

Markets also await Wednesday's U.S. consumer price index

report that will give a crucial read on inflation.