Oil prices fell for the second straight session on Monday as Iran and six world powers negotiated a deal for Tehran's nuclear program that could end Western sanctions, allowing the OPEC member to ship more crude into an already flooded market. The two sides have set Tuesday as an interim deadline for an agreement in the talks at Lausanne, Switzerland.
Officials close to the negotiations said progress has been made. Many investors believe a deal is in the making, and few expect the parties to break away without some kind of agreement.
"We're likely to stay jittery through the day on any headline coming out of Lausanne, and the stronger dollar isn't helping oil either," said analyst Phil Flynn of Price Futures Group in Chicago.
The dollar rose as the euro slumped on worries over whether Greece would secure aid before it runs out of cash in three weeks. A stronger dollar makes commodities denominated in the greenback, such as oil, more costly for holders of other currencies.
Benchmark Brent oil was down $1.15, or about 1 percent, at $55.26 a barrel by 11:12 am EDT (1512 GMT). US crude was 93 cents, or nearly 2 percent, lower at $47.94.
Brent and US crude tumbled 5 percent on Friday on worries of an Iran nuclear deal by March 31.
Tehran is keen to recover market share lost under the US-led sanctions that have restricted its crude exports to just 1 million barrels per day from 2.5 million bpd in 2012.
Oil markets are well supplied, with recent figures showing global production outstripping demand by around 1.5 million bpd.
"Regarding Iran, there are two possible outcomes: a framework deal or an extended deadline," Bjarne Schieldrop, chief commodities analyst at SEB Markets in Oslo, told the Reuters Global Oil Forum.
Societe Generale analyst Michael Wittner said if a framework agreement was reached, it was logical to expect "an immediate bearish knee-jerk reaction in the markets, with oil prices quickly losing on the order of $5."
Few investors expect the Organization of the Petroleum Exporting Countries, which pumps about a third of the world's oil, to restrain production to help push up prices, rather than maintain market share.
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