LONDON, July 29 (Reuters) - Hedge funds sold oil last week, reversing most of the purchases made the week before, as tensions in the Middle East reached a fragile equilibrium and prospect of armed conflict receded. Hedge fund and other money managers were net sellers of 65 million barrels of futures and options linked to petroleum prices in the week to July 23, after buying 84 million barrels in the week to July 16.