Oil futures edged lower in choppy trade Tuesday, with investors keeping a close eye on developments in talks aimed at reviving the Iran nuclear deal.
West Texas Intermediate crude for July delivery fell 25 cents, or 0.4%, to $65.82 a barrel on the New York Mercantile Exchange. August Brent crude , the most actively traded contract, was off 14 cents, or 0.2%, at $68.23 a barrel on ICE Futures Europe. Front-month July Brent was down 12 cents, or 0.2%, at $68.34 a barrel.
Crude was buoyed on Monday as doubts emerged over the timing of any agreement that would see the U.S. return to the nuclear deal and lift sanctions against Iran, which would allow the country's crude exports to return to the market. U.S. Secretary of State Antony Blinken on Sunday said the U.S. hasn't yet seen whether Iran is "ready and willing to make a decision to do what it has to do" to have sanctions removed.
Iran over the weekend agreed to extend an agreement allowing the International Atomic Energy Agency to monitor its nuclear program for another month, but the window of opportunity for a deal ahead of Iranian presidential elections in June appears too small, said Eugen Weinberg, analyst at Commerzbank, in a note.
Despite Tuesday's softer tone, bullish analysts said the market would be likely to take in stride a return of Iranian barrels and continued tapering of production cuts by the Organization of the Petroleum Exporting Countries and its allies.
A prospective Iran deal is seen "as a headline risk rather than an overhaul to physical balances," said Michael Tran, analyst at RBC Capital Markets.
Between the Iran deal and the OPEC+ tapering schedule, "the two policy driven bearish hurdles are being cleared, and the market can revert to focusing on oil demand, the cycle ahead, and more quantifiable drivers that can be modeled," he said in a note.