Oil dips on hopes of easing Iran tensions

May 23, 2012

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Oil prices were also pressured by a report by industry group American Petroleum Institute, indicating weaker demand in the world's biggest oil-consuming economy. - File photo

SINGAPORE: Oil prices edged lower in Asian trade Wednesday, amid hopes of easing tensions between major producer Iran and the West, but eurozone debt woes continued cast a shadow over the market.

New York's main contract, West Texas Intermediate crude for delivery in July, was down 60 cents at $91.25 per barrel while Brent North Sea crude for July shed 62 cents to $107.79 in morning trade.

“Oil has slipped on news that Iran will let UN nuclear inspectors into the country,” said Justin Harper, market strategist at IG Markets Singapore.

International Atomic Energy Agency chief Yukiya Amano said that he and Iran's chief nuclear negotiator would “soon” reach an agreement on the UN watchdog probing Iran's suspected weapons activities.

The announcement by Amano came ahead of talks in Baghdad later Wednesday between world powers and Tehran aimed at defusing tensions over the Islamic republic's nuclear ambitions.

The reaction of Western diplomats -- and Israel -- was cool, however.

Israel and much of the West believe Tehran is developing atomic weapons and have imposed sanctions on its financial and oil industries in response.

Iran vehemently rejects the accusations, insisting the programme is for peaceful purposes including cancer treatment.

Dealers are also keeping an eye on the eurozone debt crisis amdi worries Greece could exit the 17-member currency bloc, analysts said.

“The crisis in the euro area has become more serious recently, and it remains the most important source of risk to the global economy,” OECD chief economist Pier Carlo Padoan said in the organisation's latest report released Tuesday.

While the eurozone gained some breathing space at the beginning of the year from the European Central Bank pumping more than a trillion euros into banks, tensions soared in recent weeks after inconclusive elections on May 6 raised the spectre of a Greek exit.

Prices were also pressured by a report by industry group American Petroleum Institute (API) indicating weaker demand in the world's biggest oil-consuming economy.

The official weekly inventory report by the Energy Information Administration is due later Wednesday.