Oil fell back below $102 a barrel Tuesday as negotiations on Iran's nuclear program got underway in Geneva, and U.S. lawmakers tried to hammer out an agreement to raise the government's borrowing limit and avoid a possible default.
By early afternoon in Europe, benchmark crude for November delivery was down 93 cents to $101.48 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained 39 cents to close at $102.41 on Monday.
The oil price has swung back and forth for days as lawmakers attempt to resolve an impasse that has left the government partially closed and the markets worried about the U.S. defaulting on its debt for the first time. The U.S. has to increase the amount of debt it can sell by Oct. 17.
In the United States, Democrat and Republican Senate leaders could seal an agreement on Tuesday, which would reportedly allow the government to reopen through Jan. 15 and permit the Treasury to borrow normally until early to mid-February.
"Expectations are still that the U.S. will come to a last-minute agreement for an extension," said analyst Olivier Jakob of Petromatrix in Switzerland.
The start of talks in Geneva on Iran's nuclear program between the Islamic Republic and Western powers also weighed on prices.
Traders are speculating about the end of U.S.-led sanctions against Iran further down the road, allowing Tehran to increase oil exports which have fallen by over 1 million barrels a day over the past two years.
The Geneva talks "should provide some better assessment about whether Iran is ready to do something else than talk," said Jakob of Petromatrix.
Brent crude, the benchmark used to set prices for international crudes used by many U.S. refineries, was down $1.07 at $109.17 on the ICE futures exchange in London.
In other energy futures trading on Nymex:
— Wholesale gasoline was down 1.31 cents to $2.6358 a gallon.
— Natural gas rose 1.9 cents to $3.839 per 1,000 cubic feet.
— Heating oil lost 2.09 cents to $3.0108 a gallon.