Oil prices dipped in early trade on Tuesday on the latest progress in last-ditch talks to revive the 2015 Iran nuclear accord, which would clear the way to boost its crude exports in a tight market.
Brent crude futures fell 27 cents, or 0.3 per cent, to $96.38 a barrel, paring a 1.8 per cent gain from the previous session.
US West Texas Intermediate (WTI) crude futures declined 24 cents, or 0.3 per cent, to $90.52 a barrel, after climbing 2% in the previous session.
"The spectre of a U.S.-Iran nuclear deal continues to hover over the market," ANZ Research analysts said in a note.
The European Union late on Monday put forward a "final" text to revive the 2015 Iran nuclear deal, awaiting approvals from Washington and Tehran. A senior EU official said a final decision on the proposal was expected within "very, very few weeks".
"While the details around the timing of the resumption of Iran's oil exports remain uncertain even if the accord is revived, there is certainly scope for Iran to increase oil exports relatively quickly," Commonwealth Bank analyst Vivek Dhar said in a note.
He said Iran could boost its oil exports by 1 million-1.5 million barrels per day, or up to 1.5 per cent of global supply, in six months.
"A revival of the 2015 nuclear accord will likely see oil prices fall sharply given that markets probably don't believe a deal will be reached," Dhar said.
However, signs that demand may not be dented as much as feared are keeping a floor under the market for now, following stronger-than-expected trade data from China on the weekend and the surprising acceleration in US jobs growth in July.
Traders will be watching out for weekly US oil inventory data, first from the American Petroleum Institute on Tuesday and then the Energy Information Administration on Wednesday.
Five analysts polled by Reuters expect crude stockpiles fell by around 400,000 barrels and gasoline stockpiles declined also by about 400,000 barrels in the week to August 5, while distillate inventories, which include diesel and jet fuel, were unchanged.