Oil Drops as US, Iran Pledge to Continue Talks

Oil prices fell on Monday after the U.S. and Iran pledged to continue talks over the Middle Eastern producer's nuclear programme, easing concerns about a possible conflict that could disrupt supply from the region. Brent crude futures fell 49 cents, or 0.72%, to $67.56 a barrel by 0134 GMT after settling up 50 cents on Friday. U.S. West Texas Intermediate crude was at $63.13 a barrel, down 42 cents, or 0.66%, following a 26-cent gain at Friday's settlement.

"Crude oil has eased in early trading this week, with the market breathing a sigh of relief over the constructive U.S.-Iran nuclear talks in Oman," IG market analyst Tony Sycamore said.

"With more talks on the horizon, the immediate fear of supply disruptions in the Middle East has eased quite a bit."

Iran and the U.S. pledged to continue the indirect nuclear talks following what both sides described as positive discussions on Friday in Oman, despite differences. That allayed concerns that failure to reach a deal might nudge the Middle East closer to war as the U.S. has positioned more military forces in the area.

Investors are also worried about possible disruptions to supply from Iran and other regional producers as exports equal to about a fifth of the world's total oil consumption pass through the Strait of Hormuz between Oman and Iran.

Both benchmarks fell more than 2% last week on the easing tensions, their first decline in seven weeks.

However, Iran's foreign minister said on Saturday that  Tehran will strike U.S. bases

in the Middle East if it is attacked by U.S. forces, showing the threat of conflict is still alive.

Investors are also continuing to grapple with efforts to curb Russian income from its oil exports for its war in Ukraine.

The European Commission on Friday proposed a sweeping ban on any services that support Russia's seaborne crude oil exports.

Refiners in India, once the biggest buyer of Russia's seaborne crude, are avoiding purchases for delivery in April and are expected to stay away from such trades for longer, refining and trade sources said, which could help New Delhi seal a trade pact with Washington.

In a sign that rising energy prices are encouraging more production, Baker Hughes reported on Friday that U.S. energy firms last week added oil and natural gas rigs for a third week for the first time since November.

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