Oil prices slid on Tuesday as the dollar remained near a four-month high, but worries that U.S. President Donald Trump will pull out of the Iran nuclear deal underpinned the market.
U.S. West Texas Intermediate crude for June delivery finished Tuesday's session down $1.32 a barrel, or 1.9 percent, at $67.25, after settling up 47 cents on Monday.
London Brent crude for new July delivery was down $1.46, or 2 percent, at $73.23 a barrel by 2:28 p.m. ET. The June contract expired on Monday, settling up 53 cents at $75.17.
The U.S. dollar surged into positive territory for 2018 and broke past key levels against several currencies as a divergence between growth and the interest rate outlook versus other countries spurred investors to chase the currency higher. A strong dollar makes greenback-denominated oil more expensive to holders of other currencies.
"The strength of the dollar is where the pressure is coming from," said Gene McGillian, vice president at Tradition Energy.
The risk of the U.S. pulling out of the Iran nuclear deal, resulting in sanctions on the producing nation, has already largely been priced in, underpinning the market, he said.
Oil prices rose on Monday after Israeli Prime Minister Benjamin Netanyahu stepped up pressure on the United States to pull out of the 2015 nuclear deal with Iran, presenting what he called evidence of a secret Iranian nuclear weapons program. Tehran has denied ever seeking nuclear weapons.
But analysts said the lack of a smoking gun took some of the heat out of oil prices.
Olivier Jakob of PetroMatrix said the announcement "did not bring anything new to the table," and the market therefore shed some of the previous day's gains.
"It shows how much the market has already priced in the expectation that Trump will not extend the waivers," he said.
Trump has given Britain, France and Germany a May 12 deadline to fix what he views as the deal's flaws or he will reimpose sanctions.
Still, crude prices were within striking distance of a more than three-year high hit in late April, and analysts said the market is sensitive to any developments on Iranian sanctions.
Oil got some support after a Reuters survey showed OPEC oil output fell to a one-year low in April due to declining production in Venezuela and lower shipments from African producers.
Elsewhere, U.S. crude production jumped 260,000 barrels per day (bpd) to a record high of 10.26 million bpd in February, the Energy Information Administration said on Monday.
U.S. crude inventories likely rose by 1.3 million barrels last week, while gasoline and distillate stockpiles fell, a preliminary Reuters poll showed on Monday ahead of data by the Industry group the American Petroleum Institute later in the day.
Brazil's Petrobras expects oil production to start by the end of June at its Tartaruga Verde e Mestica offshore platform, which would allow the firm to add up to 500,000 barrels per day of new oil output next year, a senior official said.