Oil slid nearly 2% on Tuesday, tumbling from a two-month high, after media reports said the United States and Iran have made progress on reviving a deal restricting Iran's nuclear weapons development, that could release more barrels into the market.
Prices plunged on the reports citing Russian ambassador to the UN Mikhail Ulyanov as saying significant progress had been made, but the losses were capped after he said on Twitter that negotiators need more time to finalize an agreement.
If the United States lifts sanctions on Iran, the country could boost oil shipments, adding to global supply.
"That could put a significant amount of crude oil on the market, which is why we are steadily drifting lower now," said Bob Yawger, director of energy futures at Mizuho.
Earlier in the session, global benchmark Brent oil hit $70 a barrel for the first time since March, lifted by expectations of demand recovery.
Britain further eased coronavirus restrictions on Monday and Europe is starting to reopen cities and beaches. New cases in the United States continued to fall and New York lifted the mask requirement for vaccinated people.
"Economies are again switching a gear higher," said Tamas Varga of broker PVM. "The euphoria is reflected in the general belief that the economic revival will soon be coupled with oil demand recovery."
European and U.S. progress in the battle against the pandemic contrasts with the situation in Asia, which is limiting oil's rally.
Singapore and Taiwan have reinstated lockdown measures and India has experienced a plunge in fuel demand after imposing restrictions to curb infections.
Also weighing on the market, analysts forecast U.S. crude inventories to have risen by 1.6 million barrels last week, according to a Reuters poll ahead of weekly reports from the American Petroleum Institute at 4:30 p.m. ET, and the government on Wednesday morning.