Oil settles down off 7-year highs; US-Iran talks eyed

[BENGALURU] Oil prices settled lower on Monday on faint signs of progress in nuclear talks between the United States and Iran, which could lead to the removal of US sanctions on Iranian oil sales.

Last week, crude prices rallied for the seventh week on ongoing worries about supply disruptions fueled by frigid US weather and ongoing political turmoil among major world producers.

If US sanctions are lifted, Iran could quickly export millions of barrels of crude and help to drive down red-hot oil prices.

Brent crude settled down 58 cents, or 0.6 per cent, at US$92.69. Its session high of US$94 was the highest since October 2014.

US West Texas Intermediate crude fell 99 cents, or 1.3 per cent, to settle at US$91.32 after touching US$92.73.

On Friday, US President Joe Biden's administration restored sanctions waivers to Iran to allow international nuclear cooperation projects as talks on the 2015 international nuclear deal enter the final stretch.

Although the sanctions relief will have limited impact on Iran's struggling economy, markets viewed the move as a signal both sides were determined to reach a deal.

Speaking on condition of anonymity, a European official said top envoys to the Vienna talks - which are indirect because Iran has so far refused to sit down with US diplomats - were likely to meet on Tuesday in the Austrian capital.

"Besides the feel-good vibe coming from the negotiations, the Biden administration is feeling pressure to lower inflation, and the fastest way to do that would be to lower energy prices," said Bob Yawger, director of energy futures at Mizuho.

Crude prices, which have rallied about 20 per cent this year, are likely to surpass US$100 a barrel because of strong global demand, analysts have said.

However, the relative strength index (RSI), a measure of momentum, shows the oil market is currently overbought, and ripe for a pullback.

Fueling supply concerns, tensions remain high in Eastern Europe, with White House national security adviser Jake Sullivan saying on Sunday that Russia could invade Ukraine within days or weeks but might still opt for a diplomatic path. REUTERS