Oil prices steadied on Tuesday after a slide the previous day as dealers expected Opec to hold production at near-maximum levels at its meeting this week and eyed the possibility of a last-minute nuclear deal with Iran.
Front month US crude was up 2 cents at $62.43 a barrel, after plunging $1.26 or 2 percent on Monday. London Brent crude was up 5 cents at $62.39 a barrel.
"Opec is set to keep production quotas unchanged and investors are hopeful that the International Atomic Energy Agency will strike a deal with Iran," said David Thurtell of the Commonwealth Bank of Australia.
The market was also pushed lower on Monday's 5 percent losses on gasoline, since dealers are closing positions on the existing reformulated gasoline contract to move to another specification contract that is expected to become more liquid by May.
Oil is still up nearly $5 a barrel or 8 percent since mid-February since concerns over Iran and supply disruptions in Nigeria overshadow swollen US crude and fuel inventories. Militant unrest in Nigeria, the world's eighth-biggest oil exporter, has cut back output by close to 500,000 million barrels per day (bpd).
Militants campaigning to gain more autonomy for Nigeria's oil-producing southern delta region threatened on Sunday to halve the country's output by cutting another 1 million bpd. "We would expect the potential for further chaos in Nigeria to provide a floor for prices above $60," said Barclays Capital.
But the threat to Iranian output was deflated on Monday after the International Atomic Energy Agency said a deal over Tehran's nuclear ambitions could still be reached, after a surge of diplomacy involving Russia and EU powers.
The UN atomic watchdog's board of governors met on Monday in Vienna to consider Iran's rejection of calls to curb its nuclear activity the next step towards possible UN sanctions against the world's fourth-biggest oil exporter.
Oil traders fear any punitive action could prompt Iran to cut supply. However, the International Energy Agency (IEA), the co-ordinator of emergency oil stocks, said on Monday it could safely fill a gap left by a possible Iranian crude embargo.
At the last Opec meeting in January, Iran said it would continue to pump oil in any case but it could change its mind.
Iran has lent its backing to leaving Opec output unchanged at its meeting in Vienna on Wednesday. Top Opec producer Saudi Arabia, Kuwait and the United Arab Emirates have also said Opec should not change its 28 million-bpd ceiling.
Saudi Oil Minister Ali al-Anima said supplies were "stable," but concerns about disruption was fuelling prices, while Kuwait said oversupply in the second quarter could depress prices. The Paris-based IEA, advisor to industrialised nations, called on Opec to hold its second-quarter output steady.
"What should happen is not changing the output," said Claude Mandrill, executive director of the IEA. "Demand in crude will not be reduced in the second quarter. It's a time when additional stocks are needed."
US crude stocks are already 9 percent above last year's level and were expected to have risen another 1.5 million barrels last week in government data due on Wednesday, according to a Reuters survey of analysts.
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