The price of oil slipped to around $103 a barrel Tuesday, a six-week low, as fears of a U.S.-led military attack on Syria faded.
By early afternoon in Europe, benchmark oil for November delivery was down 60 cents to $102.99 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.16 to close at $103.59 on Monday. It has dropped 6.3 percent since closing at a two-year high of $110.53 on Sept. 6.
Some analysts said that apparent diplomatic progress over the elimination of Syria's chemical weapons and a seeming thaw in relations between Iran and Western powers were easing fears of a potential disruption in oil supplies.
The U.S. had threatened to attack Syria in retaliation for an alleged chemical gas attack against civilians. But the Obama administration has since said diplomats would be given a chance to convince Syrians to turn over their chemical weapons before deploying military force.
Carl Larry, an analyst with Oil Outlooks and Opinions, said "too much faith" was being put in Iran, which has agreed to participate in talks about its nuclear program with the U.S. and five other countries later this week at the U.N. The talks will be the highest level contacts between the U.S. and Iran in six years.
Sanctions against Iran's oil sector have cut the Islamist Republic's exports from 2.5 million barrels in 2011 to 1.2 million. He said oil is likely to return to recent highs around $110 a barrel. Others, however, argued that the lower risks linked to the Syrian crisis and abundant global supplies pointed to lower prices in the near term.
"The bearish tide appears to be gaining momentum," said a report from analysts at JBC Energy in Vienna. "The amount of oil off the market due to geopolitics remains high, but is certainly not as high as just a few weeks ago."
Investors will also be monitoring fresh information on U.S. stockpiles of crude and refined products. Data for the week ending Sept. 20 is expected to show draws of 1.5 barrels for both crude oil stocks and 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 markets, Brent crude, the benchmark for international crudes used by many U.S. refineries, fell 19 cents to $107.97 a barrel on the ICE Futures exchange in London. On the Nymex: — Wholesale gasoline fell 0.18 cent to $2.6132 per gallon.
— Natural gas lost 1.7 cents to $3.585 per 1,000 cubic feet. — Heating oil retreated 2.07 cents to $2.9359 per gallon.
Pamela Sampson in Bangkok contributed to this report.