Oil dips as markets await Iran response to U.S. killing of military commander

* Iran more likely to focus on U.S. military targets -
Eurasia
* Dec OPEC output falls by 50,000 bpd - survey
* U.S. crude stocks likely to drop 4th week in a row - poll

By Florence Tan
SINGAPORE, Jan 7 (Reuters) - Oil prices edged lower on
Tuesday, coming off their highest levels in months as the market
calmed while the world braces for Iran's response to the killing
of its top military commander by the United States.
Brent crude LCOc1 fell 44 cents to $68.47 a barrel by 0200
GMT while U.S. West Texas Intermediate (WTI) crude CLc1 was at
$62.86 a barrel, down 41 cents.
Prices surged for the previous two sesssions on fears of
escalating conflict and supply disruption in the Middle East
after the Jan. 3 drone strike in Baghdad that killed Iran's
Qassem Soleimani. But some analysts have tempered expectations
for a widespread conflict.
"Over the past three days, the scope for Iranian retaliation
has shifted in two important ways," consultancy Eurasia Group
said in a note.
"Iran is likely to focus more narrowly on U.S. military
targets," Eurasia said. "That's not to say it won't continue
low-level harassment of commercial shipping or regional energy
infrastructure but these activities will not be severe."
Meanwhile prices are also likely to gain support from higher
compliance among the Organization of the Petroleum Exporting
Countries (OPEC) on meeting production quota curbs aimed at
reducing supply.
On average, OPEC members pumped 29.50 million barrels per
day (bpd) last month, down 50,000 bpd from November's revised
figure, according to a Reuters survey. In the United States, crude oil stockpiles likely dropped
last week for a fourth week in a row as exports ramped up, a
preliminary Reuters poll showed on Monday. Six analysts polled by Reuters estimated, on average, that
crude stocks fell by about 4.1 million barrels in the week to
Jan 3.
Inventories for refined products were expected to rise with
gasoline stocks set to gain for the ninth straight week,
according to the poll.