Oil prices fell below $97 a barrel Monday amid some optimism over possible direct negotiations between the U.S. and Iran on nuclear issues and as traders booked some recent profits.
By early afternoon in Europe, benchmark oil for March delivery was down $1.03 to $96.74 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 28 cents to finish at $97.77 a barrel on the Nymex on Friday.
Oil prices have been partly supported of late by tensions in the Middle East which have fueled concerns about the safety of oil supplies flowing from the region. And sanctions against Iran have hampered the Islamic Republic's ability to sell its oil.
U.S. Vice President Joe Biden indicated a possible change in approach. On Saturday, while on a visit in Germany, Biden said Washington was ready for direct talks with Iran over its nuclear program, which Teheran insists is only for peaceful purposes. The Iranian foreign minister on Sunday welcomed Biden's gesture but did not commit to taking up the offer.
Negotiations between Iran and the five permanent members of the U.S. Security Council plus Germany have made little progress and analysts welcomed the possibility of direct talks.
"It seems that small steps in that direction have started," said Olivier Jakob of Petromatrix in Switzerland. "The U.S. had its election, Israel had its election but Iran still needs to go through its elections in June and that could still be a delay in the formal process but already a small change of dynamics will be important."
A stronger dollar also hurt oil prices by making crude more expensive and a less appealing investment for traders using other currencies. On Monday, the euro was down to $1.3559 from $1.3652 late Friday.
"We expect some further correction lower in the oil market today, as the strengthening U.S. dollar currently weighs on oil prices, while investors would like to lock in recent gains," analysts at Sucden Financial Research in London said.
Brent crude, used to price international varieties of oil, was down 81 cents to $115.95 a barrel on the ICE Futures exchange in London.
In other energy futures trading on Nymex:
- Wholesale gasoline fell 3.03 cents to $3.0233 per gallon.
- Natural gas retreated 2.7 cents to $3.274 per 1,000 cubic feet.
- Heating oil lost 1.11 cents to $3.1495 a gallon.