Oil prices lost steam on Wednesday ahead of weekly US inventory data and an international meeting on Iran's nuclear programme, falling back towards $71 and giving up some of Tuesday's commodity-driven rally.
US July crude was trading down 48 cents at $71.28 a barrel, after rebounding 2.6 percent on Tuesday in tandem with a spectacular bounce for base metals and forecasts of a heavy hurricane season in the Gulf of Mexico.
London July Brent crude fell 42 cents to $70.58. "With most polls forecasting an increase in US gasoline stocks, that's what is on radar screens today," said Gerard Burg, energy economist at the National Australia Bank in Melbourne.
"Then there is the London meeting on Iran, although I wouldn't bet my house on any resolution there," he said. A Reuters poll sees a fourth weekly rise for US gasoline inventories, with 17 analysts forecasting an average build of 1.2 million barrels last week, when government data is released later on Wednesday.
Analysts say refineries were cranking up output ahead of the Memorial Day holiday on May 29, the traditional launch of the US summer, and in time for drivers taking to the roads. Elsewhere analysts expected some reduction in demand growth when China, the world's second-largest oil consumer, increases state-capped retail gasoline and diesel prices on Wednesday, taking them 15 percent higher so far this year.
World powers meet in London on Wednesday to discuss a package of incentives and threats drafted by European countries aimed at defusing a crisis over Iran's nuclear programme. Iran is the fourth-biggest oil exporter.
Senior officials from UN Security Council permanent members plus Germany will try to narrow divisions over how persuade Tehran to halt its uranium enrichment work, with US President George W. Bush advocating further diplomatic pressure on Tuesday.