Brent crude held above $111 yesterday as the prospect of a debt deal in Greece and fresh sanctions expected to be placed on Iranian crude early this week supported prices, balancing against a stronger dollar.
Debt talks resuming in Greece was taken as a sign a long-awaited deal may be reached to prevent a default by Athens. Renewed optimism about the euro-zone's future helped steady oil prices.
But analysts were measured in their hopes for a speedy resolution and expected the market to remain range-bound until clearer indications of progress emerged.
"The market is reacting to economic and geopolitical arenas, going up a few cents and then down," said Roy Jordan, a consultant at Facts Global Energy, cautioning that the outlook for Greece could change very quickly.
"Over the weekend it could look like Greece won't [resolve its debt problems] and the market will react to that."
Brent crude was down 22 cents to $111.33 a barrel at 1305 GMT yesterday. US February crude, which expired later in the day, was down 51 cents at $99.88 a barrel. Uncertainty about demand in Europe also grew after troubled refiner Petroplus yesterday raised the possibility of a permanent shutdown of three of its five refineries.
The Swiss refiner put one plant on the market and said it would consider the future of two others in a European market awash with un-saleable plants.
The refineries have a combined throughput capacity of some 667,000 barrels per day.
The US dollar was up 0.16 per cent against a basket of currencies early in the session, further dampening oil prices yesterday.
"Although risk appetite appears favourable toward additional price gains, the market is still forced to grapple with the reality of deteriorating fundamentals," US oil analyst Jim Ritterbusch said.
Oil investors remain worried about supply disruption from Iran, whose foreign minister warned neighbours not to put themselves in a "dangerous position" by aligning themselves too closely with the US.
US officials have travelled to China, South Korea and Japan to persuade some of Iran's biggest customers in Asia to cut purchases. The EU is likely to agree on an oil embargo against Iran on Monday, France's foreign minister said yesterday.
- $111.33: price of Brent, down 22 cents during trade
- $99.88: price of US February crude, down 51 cents