LONDON (Reuters) - Oil prices dipped to near $111 a barrel on Monday as fears over an immediate cessation of Iranian crude exports to Europe eased, and markets awaited a deal on Greek debt.
Brent crude futures were down 35 cents to $111.11 a barrel by 1455 GMT and U.S. crude was down 83 cents at $98.73 a barrel. Both contracts gained more than 1 percent last week.
“Brent has been more resilient because of what is happening in the Middle East,” said Michael Hewson, an analyst at CMC Markets. “But oil is basically trading in a range. There’s a little bit of ebb and flow but not much driving it.”
Olivier Jakob, an oil analyst at Petromatrix in Switzerland, agreed. “Crude oil is trading in a very small price range, historical volatility is dropping, volume is low, and speculators are short-covering rather than buying,” he said.
“We are supposed to be near an oil crisis with missiles flying all over the Strait of Hormuz, but the volatility in crude oil has been at the lowest level in 13 months.”
Oil retreated from Friday’s levels after an Iranian parliamentary vote proposing the immediate suspension of crude exports to the European Union did not go ahead at the weekend.
Lawmakers had raised the possibility of turning the tables on the European Union, which will implement its own embargo on Iranian oil by July as it tightens sanctions on Tehran over its nuclear programme.
But analysts and traders were sceptical that Iran would abruptly cease exports without lining up alternative buyers, given its dependency on oil revenues.
“If there are further comments about stopping oil exports to Europe, prices will rise, but I rather doubt this will happen. It is just jawboning,” said Carsten Fritsch, an energy analyst at Commerzbank in Frankfurt.
The International Atomic Energy Agency (IAEA) has a delegation in Iran to try to resolve the row about the nuclear programme, which Iran says is purely civilian but the West suspects is for nuclear weapons manufacture.
India, a major customer for Iranian crude, said it would not join the wider international efforts to put pressure on Tehran by cutting oil purchases.
Analysts at JBC Energy noted the impact on the EU member states with struggling economies if Iran moved quickly.
“A move by Iran to cut exports to EU member states before buyers have time to line up alternatives would be a blow to countries such as Italy, Spain and Greece, which account for the bulk of crude EU imports from Iran,” they said.
Christopher Bellew, a trader at Jefferies Bache in London, said Brent was also taking some support from much colder weather in northwest Europe forecast for the next two to three weeks. This may encourage refineries to process more crude oil to meet heating oil demand.
By contrast, U.S. heating oil demand this week is expected to be 26.5 percent below normal as the winter remains mild.
Investors were also monitoring the progress of negotiations for a second bailout package for Greece.
European leaders are meeting in Brussels on Monday to finalise details on a permanent rescue fund for the euro zone, but discussions between the Greek government and private bondholders are ongoing.
Without an agreement on a second bailout, Greece will face a default when 14.4 billion euros of bonds mature on March 20.
“If nothing falls apart over the next several days, it will pave the way for Europe to move a bit more into the background and open the window for risk asset markets to trade more based on the fundamentals ... and not simply whether the EU will implode or not,” Dominick Chirichella of the Energy Management Institute said in a note.
Additional reporting by Florence Tan in Singapore; editing by James Jukwey