Oil prices fell Tuesday after Iran's top nuclear negotiator cited "positive steps" in a package of incentives offered to it by world powers to curb its nuclear program.
The mood on energy markets has see-sawed in recent weeks with each diplomatic development between Iran, the United Nations and the United States over Tehran's nuclear ambitions. The main fear is that Iran could disrupt oil supplies if provoked by sanctions or some other punishment.
Energy Secretary Samuel Bodman told reporters on Tuesday that if Iran were to disrupt Persian Gulf oil supplies, the U.S. government would be willing to tap its emergency oil reserve.
Speaking on state television after receiving the latest proposal from EU foreign policy chief Javier Solana, Iranian nuclear negotiator Ali Larijani called the talks with Solana "constructive" and said Iran would respond after studying the incentives. "The proposals contain positive steps and also some ambiguities," Larijani said.
After dropping as low as $71.35, light sweet crude for July delivery on the New York Mercantile Exchange settled 10 cents lower at $72.50 a barrel. July Brent crude on London's ICE Futures exchange fell 56 cents to settle $70.81 per barrel.
Oil prices have traded slightly above and below $70 a barrel for a month now amid mixed signs on U.S. gasoline consumption, nervousness about the Gulf of Mexico hurricane season and unease about the Iranian dispute and other geopolitical uncertainties, including the war in Iraq and violence in oil-rich Nigeria.
Oil prices rose Monday in response to a threat from Iran's supreme leader to disrupt global supplies if the West punishes Tehran over its nuclear program, which Iran claims is for generating electricity, not creating nuclear weapons.
Oil prices gained last week despite rising U.S. inventories and expectations, fulfilled on Thursday, that the Organization of Petroleum Exporting Countries would leave its output quotas steady at 28 million barrels a day. One contributing factor was the kidnapping of eight foreigners working on a rig off the coast of Nigeria. The workers were released Sunday. Still, the incident reminded traders that the nation's oil infrastructure is a potential target for militants.
In other Nymex trading, gasoline futures gained 1.46 cent to settle at $2.1788 a gallon, while natural gas futures fell nearly 8 cents to settle at $6.385 per 1,000 cubic feet, reports AP.
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