UPDATE 10-Oil falls 1% as investors reassess Middle East risks

* Iran more likely to focus on U.S. military targets
-Eurasia
* December OPEC output fell by 50,000 bpd -survey
* U.S. crude stocks drop in latest week -API

(Updates with API data)
By Stephanie Kelly
NEW YORK, Jan 7 (Reuters) - Oil prices fell almost 1% on
Tuesday, surrendering some recent gains as investors
reconsidered the likelihood of immediate supply disruptions in
the Middle East after the United States killed a top Iranian
military commander last week.
Brent crude LCOc1 fell 64 cents, or 0.93%, to settle at
$68.27 a barrel. U.S. West Texas Intermediate (WTI) crude CLc1
fell 57 cents, or 0.9%, to settle at $62.70 a barrel.
Prices surged during the previous two sessions on fears of
escalating conflict and potential Middle East supply disruptions
after a Jan. 3 Baghdad drone strike killed Qassem Soleimani,
head of Iran's elite Quds Force, and Iran vowed revenge. Brent
reached its highest since September while WTI rose to its
strongest since April.
"The expansion in geo-risk premium related to Iran appears
to be running out of steam as the complex seems to be taking a
'wait and see' attitude ahead of possible Iranian retaliation to
last week's events," Jim Ritterbusch, president of trading
advisory firm Ritterbusch and Associates, said in a note.
Chevron Corp CVX.N Chief Executive Michael Wirth told CNBC
that the oil markets remain well supplied despite the recent
escalation of tensions.
"Fundamentally supply and demand remain where they were
before these incidents," Wirth said in the interview.
Consultancy Eurasia Group said Iran probably would focus on
U.S. military targets rather than energy targets.
"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," it added.
Still, the United States Maritime Administration website
renewed its warning about threats to U.S. commercial vessels
from Iran and its proxies in the Gulf and surrounding area.

Prices also fell despite higher compliance among the
Organization of the Petroleum Exporting Countries (OPEC) on
meeting production quota curbs aimed at reducing supply.
OPEC members pumped 29.5 million barrels per day (bpd) last
month, down 50,000 bpd from November's revised figure, according
to a Reuters survey published on Monday.
U.S. crude inventories fell by 5.9 million barrels in the
week to Jan. 3 to 430 million barrels, data from industry group
the American Petroleum Institute showed on Tuesday. Analysts had
expected a draw of 3.6 million barrels. Official government data is due to come out on Wednesday.