* Oil gives back most of earlier gains
* Talks between Iran and major powers inconclusive
* Tropical Storm Dolly headed for Mexico's Yucatan
(Updates throughout, refiles to remove extraneous dollar
sign from 95 cent Brent oil price move in third para)
By Peter Graff
LONDON, July 21 (Reuters) - Oil gave back most of its gains
of more than $3 during trading on Monday, as worry over Iran and
a storm in the Gulf of Mexico were not enough to sustain a price
recovery after the biggest one-week slide on record.
U.S. light crude for August delivery <CLc1> fell back below
$130 having been as high as 132.05.
At 1405 GMT it was up 71 cents at 129.60, having briefly
dipped below the opening price of 128.88. London Brent crude
<LCOc1> was 95 cents higher at $131.14, off highs of $133.15.
A stalemate over talks to resolve Iran's nuclear standoff
with the West and the tropical storm in the Gulf of Mexico both
provided reasons to call a halt to last week's sell off, but
were not enough to sustain a recovery in prices.
"If you're in a downward trend and you get a couple of
factors providing upward pressure, the upward pressure might not
be enough to get prices to go up, but could cause prices to
stabilise," said Mike Wittner of Societe General in London.
Oil's losses last week were the biggest in dollar terms
since futures began trading in New York in 1983 and in
percentage terms the steepest sell-off since late 2004.
Major powers on Saturday gave oil producer Iran two weeks to
rein in its nuclear programme, which it says is only for
peaceful purposes, or face tougher sanctions.
But the talks ended in stalemate despite unprecedented U.S.
participation. []
The war of words between Iran and the West has contributed
to tensions in the Middle East that helped to push oil prices to
a record high of $147.27 on July 11.
But prices corrected sharply last week, pressured in part by
concern over the fragile economy in the United States, the
world's biggest energy consumer, as well as by expectations the
weekend talks on Iran could defuse tension.
Tropical Storm Dolly, which is headed for Mexico's Yucatan
Peninsula, also helped to boost the market as the storm was set
to pass just north of Mexico's huge Cantarell oil field.
[]
The fourth storm of the 2008 Atlantic hurricane season is
expected to emerge into the Gulf of Mexico on Monday local time,
north of the Cantarell field and other ports and platforms used
by the world's sixth-largest oil producer and top supplier to
the United States.
"She may dissipate, but if direction were to change then a
protective shut in of production facilities across the Gulf of
Mexico is likely," said Rob Laughlin, at broker MF Global.
(Reporting by Jane Merriman and Peter Graff in London, and
Fayen Wong in Perth, editing by Anthony Barker)
