Updated from 12:16 p.m. EDT

Oil prices fell below $69 a barrel Friday amid another selloff in commodity markets, as tensions eased slightly in the standoff surrounding Iran's nuclear ambitions.

Light, sweet crude lost 92 cents to settle at a six-week low of $68.53 a barrel on Nymex. Earlier in the session, futures had been nearing $70 as traders shook off concerns of inflation and lower fuel demand and went bargain hunting. But they quickly reversed course with Iran's announcement.

Iran's ambassador to the U.N. said a meeting on Thursday with nuclear monitors was "positive" and that Tehran was looking for a solution to the standoff over uranium enrichment. In February, Iran restarted enriching uranium in defiance of the U.N. and has vowed to expand the program.

The drop in crude prices had a mixed effect on the rest of the energy complex. Wholesale gasoline added 2 cents to $2.03 a gallon, while heating oil dipped 3 cents to $1.92 a gallon. In other markets, gold, copper and silver all fell, suggesting risk premiums are narrowing amid persistent inflation concerns.

Crude futures have fallen 5% this week over concerns the

Federal Reserve

will continue raising interest rates to slow economic growth and quell inflation. A rate hike would slow the economy and possibly drive down demand for crude.

On the bull side of the equation, long-standing supply problems and booming demand have underpinned prices and kept inventories tight. The world consumes 85 million barrels of oil per day and there is only around 2 million barrels of spare capacity to cover spikes in demand. Already, output is down in Nigeria and Iraq, and may be cut in Iran, the world's fourth-largest producer, if a standoff over its nuclear program results in economic sanctions.

"Prices will not fall until this anxiety abates," Mohammed Barkindo, OPEC's acting secretary-general, told

Reuters

Friday.

Geopolitics and tight supplies have driven crude prices up 13% this year. Analysts say the price of crude per barrel could come down as much as $15 to $20 if political tensions were resolved.

The Organization of the Petroleum Exporting Countries, which pumps 40% of the world's crude, will likely keep production at record levels in the third quarter, said Iran's OPEC governor Friday. The cartel has been pumping 28 million barrels of crude per day to meet skyrocketing global demand.

But supplies haven't been enough. High energy prices have also crimped fuel use this year. The International Energy Agency, which advises 26 countries on energy policy, revised its outlook this week for world energy demand growth by 200,000 barrels to 1.25 million barrels. Global demand was cut from 85.1 million barrels to 84.8.

A glut of supplies sent natural gas down 4 cents to a 15-month low of $5.96 per million British thermal units. The contract has sank since Thursday, when the U.S. Energy Department reported another boost in supplies to 2 trillion cubic feet. Inventories now stand 31% above last year.

Mild winter temperatures and low heating demand have driven up inventories to a level typically not seen this early in the season. But that surplus could quickly be depleted if the summer is very hot or another round of hurricanes shuts down the Gulf Coast's petroleum industry. Nine months after Hurricane Katrina, 22% of the region's oil production and 13% of gas output is still offline.

The decline in crude didn't prompt a selloff in shares, as sometimes happens with energy. The Amex Oil Index, which tracks 13 of the largest drillers, jumped 1%, with

Occidental Petroleum

(OXY) - Get Report

,

Hess

(HES) - Get Report

and

BP

posting the largest increases.

The Philadelphia Oil Service Index climbed less than 1%.

Global Santa Fe

(GSF)

,

Baker Hughes

(BHI)

, and

Nabors Industries

(NBR) - Get Report

helped the index stay positive.

Schlumberger

(SLB) - Get Report

was one of the top traded stocks by volume Friday after Standard & Poor's and CapitalOne southcoast both upgraded the stock on rising demand for oil drilling services.