LONDON (Reuters) – Oil slipped to $69 a barrel on Friday after Iran's president welcomed a proposal to defuse a standoff over Tehran's nuclear work that has raised concern about threats to oil supply.

Iranian President Mahmud Ahmadinejad called the proposal by world powers a "step forward," but gave no sign when an answer would come. Worries the dispute may cut supply from OPEC member Iran helped oil hit a record high above $75 in April.

"It is starting to feel like the Iranians are considering some discussions," said analyst Olivier Jakob at Petromatrix.

"The Iranian situation has been holding up the markets. I would expect this thing to start easing now."

U.S. light sweet crude was down 55 cents to $68.95 by 1528 GMT, reversing an earlier gain. London's Brent crude was down 79 cents at $67.66 a barrel.

Earlier on Friday, oil rallied alongside gold and equities after U.S. Federal Reserve Chairman Ben Bernanke toned down his warnings against U.S. inflation, and said oil prices had had a limited impact on the economy.

U.S. crude has largely traded between $68 and $73 since early May, pressured by worries about slowing growth and underpinned by real and threatened supply disruptions.

"I think we are just going to drift along, with Iran in the background," said Mike Wittner, an oil analyst at investment bank Calyon.

'Encouraging'

Ahmadinejad, markedly more upbeat about the proposal on a trip to China than he has been at home, said Iran was examining the offer of incentives for Tehran to stop enriching uranium.

He also warned Iran would not be concerned by possible sanctions if it rejects the June 6 offer.

Oil hit a record $75.35 in April on concern the row over Iran's nuclear work could lead to a cut in Iran's oil exports and as violence shut down a quarter of output in Nigeria. U.S. Energy Secretary Sam Bodman on Friday called Ahmadinejad's initial positive comments "encouraging."

The West believes Iran's uranium enrichment could be used to make nuclear weapons. Tehran says it is purely for power generation and civilian use.

Oil gained on Wednesday and Thursday, aided by data showing a fall in U.S. crude inventories as refineries ramped up operations to meet peak gasoline demand in summer.

Commodities and oil fell earlier in the week on worries that inflation would lead to higher interest rates, slowing economic growth and energy demand.

Overall, oil prices are up nearly 13 percent up so far this year and stand at their highest, in real terms, since 1980. They have surged from $20 a barrel at the start of 2002.