Oil slipped on Tuesday after Iran said world powers had made positive proposals to end a crisis over its nuclear programme, opening the door to more talks.
Oil swept to a record US$75.35 in April as the dispute between Iran and the United States rumbled on. On Sunday, Iran's Supreme
Leader Ayatollah Ali Khamenei said oil flows from the Gulf would be endangered if Washington made a "wrong move." But there was a more conciliatory tone on Tuesday when Iran took delivery of a package of incentives put together by Britain, France and Germany then approved by the United States, China and Russia.
"The proposals had some positive steps in them and some ambiguities which should be removed," Ali Larijani, secretary of Iran's Supreme National Security Council, said after meeting European Union foreign policy chief Javier Solana.
"We hope, after we study the proposal in detail, we will have another round of talks and negotiations to achieve a balanced and logical conclusion." US crude oil settled 10 cents lower at US$72.50 a barrel, after falling as low as US$71.35 in intraday activity. London Brent lost 56 cents to trade at US$70.81.
Strong oil prices have sparked concerns that demand growth may stall. But the US Energy Information Administration on Tuesday said consumers were adjusting to higher prices and revised demand projections upward.
Investors and analysts said the oil price would be hostage to Iran headlines for the foreseeable future. The dispute over Iran's nuclear programme has added impetus to a rally that has taken oil from US$20 in January 2002.
Iran says it wants to enrich uranium for power generation but the United States accuses it of weapons ambitions.
The fact that Opec-member Iran is the world's fourth biggest oil exporter and lies on the Straits of Hormuz, a crucial trade passage, has added urgency to efforts to find a solution.
US Energy Secretary Sam Bodman said on Tuesday the world could cope with a disruption in Iran's exports of 2.4 million barrels a day "for a while." Barclays Capital analyst Kevin Norrish said Iran's initial response to the incentives package was taking some of the heat out of prices, "but the underlying positions of the different parties, it's still difficult to see how those can be bridged." INFLATION
Tugging oil lower was US Federal Reserve chief Ben Bernanke's observation late on Monday that the US central bank needed to remain vigilant on inflation risks even as the economy shifted to a slower pace of growth.
The comment fired speculation that US interest rates have further to rise, stifling oil demand growth in the top consumer nation.
"US bond and stock markets fell after the Bernanke comment -- the main oil market drivers are now hedge funds and pension funds and their key battleground is equity and bond markets, so if they lose money there they like to take profits elsewhere such as on US crude and metals," said Naohiro Niimura, vice president of derivatives at Mizuho Corporate Bank in Tokyo.
US government data on Wednesday is expected to show petrol stocks rose for the sixth week in a row as refineries raise production to meet peak summer demand, a Reuters survey found EIA/S .
- REUTERS
Oil slipped on Tuesday after Iran said world powers had made positive proposals to end a crisis over its nuclear programme, opening the door to more talks.
Oil swept to a record US$75.35 in April as the dispute between Iran and the United States rumbled on. On Sunday, Iran's Supreme
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