Oil falls on Iran talks and Greek fears

REUTERS -- Oil prices were weakened on Tuesday by data showing the euro zone economy shrank in the fourth quarter and news that major powers accepted Iran's offer to meet and discuss its nuclear program.

Oil tracked global share prices and the euro, which felt pressure from worries about a global growth slowdown and uncertainty over whether enough private investors would participate in a Greek debt restructuring to enable it to avert a default.

The EU's foreign policy chief, representing six powers - the United States, Russia, China, France, Britain and Germany - wrote to Iran's chief nuclear negotiator accepting an offer to meet to discuss Tehran's nuclear program.

Also helping ease investor fears of oil supply disruption because of the tensions over its nuclear program, Tehran said on Tuesday it would give the U.N.'s International Atomic Energy Agency (IAEA) access to Parchin, a military complex previously off-limits to IAEA nuclear inspectors.

"The risk premium on Iran was pretty high, so one should expect to see that fading because world powers are willing to talk to Iran," said Olivier Jakob, an analyst at Petromatrix in Zug, Switzerland.

"It's much harder to launch a military strike on a country if you are talking to them," Jakob said.

Brent crude fell $1.50 to $122.30 a barrel at 11:35 a.m. EST (1635 GMT), bottoming at $121.59, just above of the 20-day moving average at $121.32.

U.S. crude dropped $1.70 to $105.02 a barrel, with the $104.61 intraday low just above the 20-day moving average of $104.22.

The European Union data showing the economy in the euro zone shrank 0.3 percent in fourth-quarter 2012 followed Monday's news that China cut its 2012 economic growth target to an eight-year low of 7.5 percent, fanning fears about curbed oil demand growth.