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US crude settles down 17 cents, at $49.59 a barrel

Brent crude tumbled more than 3 percent on Monday on speculation of a nuclear deal that could boost Iran's oil exports.

U.S. crude fell 17 cents, or 0.3 percent, to settle at $49.59 a barrel. It rose about 1 percent earlier as traders bet the gap between the two would narrow.

Brent crude was down 2.9 percent, at $59.65. Front-month Brent jumped 18 percent in February, the largest monthly rise since May 2009.

Iranian Foreign Minister Mohammad Javad Zarif said a deal on Iran's nuclear program could be concluded this week if the United States and other Western countries had sufficient political will and agreed to remove sanctions on Tehran.

Iranian oil exports have been restricted by sanctions for several years as the United States and Europe responded to Tehran's nuclear program, although Iran says its nuclear plans are peaceful.

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Analysts say Iran could increase its oil sales fairly quickly if sanctions were lifted and may eventually be able to raise exports by up to 1 million barrels per day. A Reuters survey last week showed Iran pumped around 2.8 million bpd in February.

Brent was also pressured initially by rising Libyan output and a firmer dollar that weighed on greenback-denominated commodities.

In the case of U.S. crude, its advance versus Brent came after a smaller-than-expected build in the Cushing, Oklahoma delivery point, reported by oil services firm Genscape.

Genscape's Cushing report, and the American Petroleum Institute inventory data on Tuesdays, are a precursor to the government's weekly crude stockpiles report on Wednesdays.

"The Genscape expectations for a slower rise in crude at Cushing and returning production in Libya reverses the dynamic in play last week," Phil Flynn, analyst at Price Futures Group in Chicago, said, referring to the rally in Brent and bigger Cushing builds then.

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Brent's premium to U.S. crude was at below $10.16 a barrel, after reaching above $13 earlier on Monday.

The spread "became very, very crowded last week as everyone jumped in" when Brent began fetching a premium above $9, said Ola Vines at Eagle Commodities Brokers Ltd in London.

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The dollar hit an 11-year high against a basket of currencies after a rate cut in China dented the Chinese yuan and also hit emerging Asian currencies. Oil is priced in dollars on spot markets and a stronger U.S. currency tends to depress fuel demand from holders of other currencies.

Disruption to oil supplies from members of the Organization of the Petroleum Exporting Countries has helped support crude with lower output from Libya and Iraq in the first couple of months of this year.

Libya's production has risen to more than 400,000 barrels per day (bpd), officials said.

Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt, said much of the recent strength in oil had been due to speculative buying. "The market is still over-supplied," Fritsch told the Reuters Global Oil Forum.

Correction: WTI crude futures settled down 17 cents, at $49.59 a barrel on Monday. An earlier headline misstated the closing level.