Oil pulled back after hitting fresh multi-year highs on Monday, as investors awaited the outcome of this week's talks between Iran and world powers over a nuclear deal that is expected to boost crude supplies.
Brent crude futures for August fell 66 cents, or 0.9%, to $71.23 a barrel by 0645 GMT, after earlier hitting $72.27, their highest since May 2019. U.S. West Texas Intermediate crude for July touched $70 for the first time since October 2018 but reversed course to be at $69.10 a barrel, down 52 cents, or 0.8%.
Investors may have sold off some contracts to take profit when WTI hit $70, said Avtar Sandu, a senior commodities manager at Phillips Futures in Singapore.
"The primary concern is about Iranian barrels coming back into the market but I don't think there will be a deal before the Iranian presidential election," he added.
Data showing a 14.6% year-on-year drop in China's crude oil imports in May on Monday also weighed on prices.
However, Brent and WTI have risen for the past two weeks as fuel demand is rebounding in the United States and Europe after governments loosened COVID-19 restrictions ahead of summer travel.
Global oil demand is expected to exceed supplies in the second half despite a gradual easing of supply cuts by OPEC+ producers, analysts say.
A slowdown in talks between Iran and global powers in reviving a 2015 nuclear deal and a drop in U.S. rig count also supported oil prices.
Iran and global powers will enter a fifth round of talks on June 10 in Vienna that could include Washington lifting economic sanctions on Iranian oil exports.
While the European Union envoy coordinating the negotiations had said he believed a deal would be struck at this week's talks, other senior diplomats have said the most difficult decisions still lie ahead.
Analysts expect Iran, which is having its presidential election on June 18, to increase its production by 500,000 to 1 million barrels per day once sanctions are lifted.
In the United States, the number of oil and natural gas rigs operating fell for the first time in six weeks as growth in drilling slowed.
This "suggests that U.S. oil drillers are less enthusiastic in adding more U.S. oil production and hence reduces the risk of a supply glut in the global oil market in H2 2021," CMC Markets analyst Kelvin Wong said in emailed comments.