LONDON (Reuters) – Oil retreated to around $143 a barrel on Monday, taking a pause from a record-breaking rally that has lifted prices by almost 50 percent to prices this year.
Investors were eyeing mixed signals from Iran, the world’s fourth-largest oil exporter, in its dispute with the West over its nuclear work, and a rise in the value of the dollar against other major currencies.
“The market had been trending sideways for a while and now there’s a break downwards,” said Christopher Bellew, senior oil broker at Bache Commodities.
“Once it made a break below Friday’s lows, that probably sparked off a bit of technical selling.”
U.S. crude traded at $143.04 a barrel by 7:02 a.m. EDT, below Friday’s intra-day low of $143.22. Brent crude fell 93 cents to $143.49.
The New York Mercantile Exchange did not issue an official Friday closing price due to the July 4 holiday.
On Monday, the dollar reached a one-week high against a basket of major currencies, benefiting from a European Central Bank tone that has reduced expectations of further interest rate rises.
Strength in the U.S. dollar can reduce the appeal of oil and other commodities to investors as a hedge against inflation.
Oil in New York hit a record $145.85 on Thursday, but later eased as traders anticipated easing tensions between Iran and the West after Tehran responded to a package of incentives to try to resolve the dispute.
But Iranian President Mahmoud Ahmadinejad said on Monday Iran would not abandon its right to enrich uranium and rejected a major powers’ demand to do so as “illegitimate,” the official IRNA news agency reported.
Tehran’s foreign minister on Sunday expressed optimism about what he said was a “new environment” for talks.
Oil has gained almost 50 percent this year, driven partly by tension over Iran’s nuclear program and expectations that global oil supply will fail to keep pace with demand growth from China and India.
“Geopolitical concerns are still supporting oil prices,” said Toby Hassall, analyst at Commodity Warrants Australia in Sydney.
“Apart from Iran, oil prices will also be dependent on the U.S. dollar movements and the U.S. equity markets this week.”