Investing.com - Crude oil futures were under pressure on Tuesday, amid signs of progress in discussions between western diplomats and Iran over curbing Tehran's disputed nuclear industry in exchange for lifting international sanctions.
Talks between western powers and Iran taking place in Switzerland intensified amid hopes of reaching an agreement over Tehran’s nuclear program ahead of Tuesday night's deadline.
Any sign of a deal between Iran and world powers could result in a flood of Iranian crude returning to an already oversupplied market.
On the ICE Futures Exchange in London, Brent oil for May delivery slumped $1.25, or 2.22%, to trade at $55.04 a barrel during U.S. morning hours after touching a session low of $54.78, the weakest level since March 25.
On Monday, Brent futures dipped 12 cents, or 0.21%, to close at $56.29. London-traded Brent prices are on track to post a decline of nearly 12% this month.
Oil prices have fallen sharply in recent months as the Organization of Petroleum Exporting Countries resisted calls to cut output, while the U.S. pumped at the fastest pace in more than three decades, creating a glut in global supplies.
Elsewhere, on the New York Mercantile Exchange, crude oil for May delivery hit an intraday low of $47.32 a barrel, before trading at $47.81, down 88 cents, or 1.8%. A day earlier, Nymex oil futures shed 19 cents, or 0.39%, to settle at $48.68.
New York-traded oil futures are down approximately 8% in March as record-high domestic supplies weighed on sentiment.
Total U.S. crude oil inventories stood at 466.7 million barrels as of last week, the most in at least 80 years, underling concerns over a supply glut.
Market participants looked ahead to fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of demand in the world’s largest oil consumer.
The American Petroleum Institute will release its inventories report later in the day, while Wednesday’s government report could show crude stockpiles rose by 4.2 million barrels in the week ended March 27.
Meanwhile, the spread between the Brent and the WTI crude contracts stood at $7.23 a barrel, compared to $7.61 by close of trade on Monday.
Elsewhere, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.3% to 98.61 early on Tuesday. The index is on track to post a gain of 3% this month.
The dollar has been bolstered by the diverging outlook for monetary policy in the U.S. compared to other major economies, such as Europe and Japan.
Investors were turning their attention to Friday’s U.S. employment report for February for further indications on the future path of monetary policy.
A strong U.S. nonfarm payrolls report was likely to add to speculation over when the Federal Reserve will begin to raise interest rates, while a weak number could weigh on the dollar by undermining the argument for an early rate hike.