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Brent crude futures fell $1.17, or 1.5%, to settle at $74.79 a
barrel, while the U.S. West Texas Intermediate crude fell $1.12,
or 1.6%, to $70.17 a barrel.
Both benchmarks lost more than $3 on Thursday after a media
report that a U.S.-Iran nuclear deal was imminent and would
result in more supply. Prices pared losses after both countries
denied the report, ending about a dollar a barrel lower.
"Thursday's price moves show how fragile oil is," said UBS
analyst Giovanni Staunovo.
"The Saudi cut lifted prices slightly, and then the chatter of
the potential return of Iranian barrels saw a large drop. Long
investors are likely on the sidelines until larger oil inventory
declines become visible," he said.
Oil prices had risen early in the week, buoyed by Saudi Arabia's
pledge over the weekend to cut more output on top of the cuts
agreed earlier with the Organization of the Petroleum Exporting
Countries and its allies.
However, a rise in U.S. fuel stocks and weak Chinese export data
have weighed on the markets.
"As we move deeper into the summer driving season in the
Northern Hemisphere, demand will be a key factor in determining
whether limited inventories must drive prices higher, or soft
demand leads to lower prices," said Rob Haworth, senior
investment strategist at U.S. Bank Asset Management.
China's factory gate prices fell at the fastest pace in seven
years in May and quicker than forecasts, as faltering demand
weighed on a slowing manufacturing sector and cast a cloud over
the fragile economic recovery.
Some analysts expect oil prices to rise if the U.S. Federal
Reserve pauses hiking interest rates at its next meeting over
June 13-14. The Fed's decision may also influence Saudi Arabia's
next move, analysts said.
"The important thing is that despite those changes (Saudi,
US-Iran) to output, oil remains below $80, no doubt much to the
disappointment of the Saudis," said OANDA analyst Craig Erlam.
"What comes next may well depend on the inflation data and
interest rate decisions over the coming weeks," he said.
(Reporting by Shariq Khan; Additional reporting by Shadia
Nasralla, Yuka Obayashi and Sudarshan Varadhan; Editing by
Marguerita Choy and Richard Chang)
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