WASHINGTON – Crude oil futures fell Monday as traders shrugged off the potential impact the first named storm of the Atlantic hurricane season would have on petroleum output, but analysts said the market's broader trend remains murky.
Light sweet crude for July delivery declined by 93 cents to $70.70 a barrel on the New York Mercantile Exchange, where gasoline futures fell by more than 1.5 cent to $2.135 a gallon.
July Brent crude on London's ICE Futures edged up 4 cents to $70.52 per barrel.
"It has really been trendless over the past few weeks. There are lots of cross-currents," said Man Financial broker Andrew Lebow, noting how concerns about geopolitics are being offset by global economic worries.
While tensions in the Middle East no doubt underpin high world oil prices, there was also a measure of relief on Monday that Iran had accepted some parts of a Western offer aimed at getting the country to halt its nuclear program, even as it rejected others.
Tropical Storm Alberto had maximum sustained wind near 70 mph, just below hurricane strength of 74 mph, the National Hurricane Center said, and it was expected to reach Florida on Tuesday.
Analysts said they expected little if any Gulf of Mexico production to be shut in.
Still, geopolitical worries will keep a floor under oil prices, said Victor Shum, an energy analyst based in Singapore with Texas-headquartered Purvin & Gertz.
"The market's aware that the Iranian issue is not going to be resolved in the short-term," Shum said, adding that "prices will continue to trade in the tight band of around $70 a barrel."
In its first specific comments on the incentive package, Iran said Sunday that the key issue of uranium enrichment — a process that can make nuclear fuel for a power plant or fissile material for an atomic bomb — needed clarification. Iranian Foreign Ministry spokesman Hamid Reza Asefi told a news conference the package includes "points which are acceptable. There are points which are ambiguous. There are points that should be strengthened, and points that we believe should not exist." He did not give specifics.
The incentives include promises that the United States and Europe will provide Iran nuclear technology and that Washington will join direct talks with Tehran.
Traders also took note of comments from BP PLC's chief executive, Lord Browne, who said in an interview with Germany weekly Der Spiegel that oil prices could drop to about $40 a barrel in the medium term as new supplies are found, and might fall even further in the long term.
While cautioning that "we cannot really expect that prices will drop back sharply in the short term," Browne said that large new oil fields are still being found and that regions such as West Africa have significant oil supplies, according to the interview published Monday.
"It is very likely that, in the medium term, prices will stand at about $40 on average," Browne was quoted as saying. "In the very long run, even $25 to $30 are possible."