Traders had taken some relief from conciliatory remarks out of Iran on Saturday that the Western package of incentives meant to persuade the Islamic republic to give up its uranium enrichment program was "a step forward."But the issue remains tense, with Bush saying if Iran rejects the incentives, it will face action before the
U.N. Security Council and progressively stronger political and economic sanctions.
"The calming comments from Tehran have taken out part of the risk premium, but the threat of a potential supply disruption from Iran is still present, although not imminent," said Victor Shum, an energy analyst with Purvin & Gertz.
"In the short term, if we see progress toward a diplomatic resolution in Iran, prices will drop to the low- to mid-$60s," he said.
Concerns over Iran appeared to outweigh expectations that oil and related stock levels will increase or drop only marginally when the U.S.
Department of Energy publishes its weekly snapshot of supplies on Wednesday.
Vienna's PVM Oil Associates said the figures would likely show an increase in gasoline stocks for the eighth week running. It said levels would probably rise by 1.1 million barrels to 214 million barrels for the week ending June 16.
"Relatively sluggish demand, coupled with high domestic output and imports is expected to result in further increases of U.S. gasoline levels in the coming weeks, especially with refinery runs likely to have risen as well by around .02 percent, week-on-week," it said.news.yahoo.com/s/ap/20060620/ap_on_bi_ge/oil_prices_17