The price of oil slipped to near $92 a barrel Tuesday, on concerns about global economic growth and news that that Iran will allow the U.N. nuclear agency to restart a probe into its nuclear program.
By early afternoon in Europe, benchmark oil for June delivery was down 44 cents to $92.13 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.09 to settle at $92.57 in New York on Monday.
In London, Brent crude for July delivery was up 14 cents at $108.95 per barrel on the ICE Futures exchange.
Crude has slumped from $106 earlier this month on fears that global economic growth might slow more than expected this year. In Europe, government austerity measures meant to lower debt have been crippling growth in many large economies like Italy and Spain.
Also hurting energy prices on Tuesday was a rise in the dollar, which tends to push down oil prices by making crude more expensive for investors trading in other currencies. The euro slipped to $1.2758 from $1.2793 late Monday in New York, while the dollar rose to 79.77 yen from 79.36 yen after Fitch lowered Japan's sovereign debt rating.
Meanwhile, the head of the International Atomic Energy Agency, Yukiya Amano, said Tuesday that Iran had agreed to let IAEA inspectors to resume their investigation into its nuclear program. On Wednesday, talks are set to start in Baghdad between Iran and six world powers about the country's uranium enrichment efforts and its suspected intent to develop nuclear weapons. Prices had risen in previous months due to international tensions over Iran, which had threatened to block oil shipments out of the Persian Gulf.
While analysts at Commerzbank in Frankfurt said the deal between Iran and the IAEA, "should result in a reduction in the risk premium and a further decrease in oil prices," a report from JBC Energy in Vienna said "it may be a fair assumption that the mere possibility of the negotiations failing is keeping markets on their toes."
Some analysts say crude will likely rebound amid a slowly improving U.S. economy and strong demand from developing countries.
"Barring the worst fears of financial markets, prices are likely to recover from current levels as market fundamentals reassert themselves," National Australia Bank said in a report.
Traders are also closely watching China, where data in recent months has suggested growth in the world's second-largest crude consumer is weakening. Chinese Premier Wen Jiabao said over the weekend that his government is ready to take more steps to boost growth.
Fresh information on U.S. stockpiles of crude and refined products will later in the day provide more guidance for the oil market.
Data for the week ending May 18 is expected to show a build of 750,000 barrels in crude oil stocks and a draw of 200,000 barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
The American Petroleum Institute will release its report on oil stocks later Tuesday, while the report from the Energy Department's Energy Information Administration - the market benchmark - will be out on Wednesday.
In other energy trading, heating oil was up 0.59 cents at $2.8662 per gallon and gasoline futures added 0.05 cent to $2.9406 per gallon. Natural gas gained 0.8 cent to $2.617 per 1,000 cubic feet.
Alex Kennedy in Singapore contributed to this report.