NEW YORK: Oil prices slid more than 1 percent on Tuesday as the dollar remained near a four-month high, but worries that U.S. President Donald Trump will pull out of the Iran nuclear deal underpinned the market.
The U.S. dollar surged into positive territory for 2018 and broke past key levels against several currencies as a divergence between growth and the interest rate outlook versus other countries spurred investors to chase the currency higher. A strong dollar makes greenback-denominated oil more expensive for holders of other currencies.
"The strength of the dollar is where the pressure is coming from," said Gene McGillian, vice president at Tradition Energy.
The risk of the U.S. pulling out of the Iran nuclear deal, resulting in sanctions on the producing nation, has already largely been priced in, underpinning the market, he said.
Brent crude for July delivery settled at $73.13 a barrel, down $1.56 or 2.1 percent in the session. The June contract expired on Monday, settling up 53 cents at $75.17.
U.S. West Texas Intermediate crude for June delivery settled down $1.32, or nearly 2 percent, at $67.25 a barrel. Crude extended losses briefly in post-settlement trade, after industry trade group the American Petroleum Institute released weekly inventory figures showing a larger-than-expected crude stockpile build.
Oil prices rose on Monday as Israeli Prime Minister Benjamin Netanyahu presented what he called evidence of a secret Iranian nuclear weapons programme. Tehran has denied ever seeking nuclear weapons.
But analysts said the lack of a smoking gun took some of the heat out of oil prices.
Olivier Jakob of PetroMatrix said the announcement "did not bring anything new to the table," and the market therefore shed some of the previous day's gains.
"It shows how much the market has already priced in the expectation that Trump will not extend the waivers," he said.
Trump has given Britain, France and Germany a May 12 deadline to fix what he views as the flaws of the 2015 nuclear deal, or he will reimpose sanctions.
Still, crude prices were within striking distance of a more than three-year high hit in late April, and analysts said the market is sensitive to any developments on Iranian sanctions.
Growing U.S. crude production and stockpiles have weighed on the market. Ahead of weekly data, crude stockpiles were forecast building last week while refined product inventories were seen declining, a preliminary Reuters poll showed on Monday.
The API released its data at 4:30 p.m. EDT (2030 GMT) on Tuesday, and the official government report is due at 10:30 a.m. EDT on Wednesday.