VIENNA, Austria (AP):

OIL PRICES dropped below US$69 a barrel yesterday, falling below 10-week lows despite continued jitters over the stand-off between Iran and the international community over Tehran's nuclear programme.

The crude contract began its decline on Friday after the United Nations failed to impose sanctions on Iran for refusing to stop its nuclear enrichment programme.

Also easing energy prices were strong inventory data, a more-subdued forecast for this year's hurricane season and a mixed United States jobs report suggesting fuel demand probably won't surge sharply.

Light, sweet crude for October delivery fell 54 cents to US$68.64 a barrel in electronic trading on the New York Mercantile Exchange by afternoon in Europe.

The contract fell US$1.07 Friday to close at US$69.19 a barrel - its lowest settlement price since finishing at US$68.94 on June 20.

Brent crude slipped 75 cents on London's ICE Futures exchange, trading at US$68.40.

Nymex floor trading was closed yesterday for the Labor Day holiday in the U.S.

"Bearish news such as the unexpected increase of U.S. gasolene stocks and the downgrading of the first hurricane of the season outweighed the fact that the ultimatum issued to Iran elapsed without a solution," said Vienna's PVM Oil Associates.

Iran, the second-largest producer in the Organisation of Petroleum Exporting Countries after Saudi Arabia, defied the United Nations Security Council's Thursday deadline to halt its nuclear programme.

Traders have been worried that Iran might block oil exports if punished by the U.N.

At this point, though, American officials and others say no action will be sought before a key European diplomat meets with Tehran's atomic energy chief this week to seek a compromise.