LONDON: World oil prices slipped Tuesday with US crude ducking under $50 as demand took a hit from the looming return of Iranian supplies and the strong US currency, analysts said.
Expectations of more Iranian crude flooding the oversupplied global market within months after a landmark nuclear deal continue to drag the oil market lower.
Brent North Sea crude for September delivery nudged four cents lower to stand at $56.62 a barrel nearing midday in London.
US benchmark West Texas Intermediate for delivery in August ducked below $50 per barrel for the first time in more than three months.
The contract later stood at $50.11 a barrel, also down four cents from Monday's closing level.
"Most of the movement that we're seeing now in oil prices mainly comes from the dollar strength," said Daniel Ang, analyst with Phillip Futures in Singapore.
The dollar got a boost after Federal Reserve chair Janet Yellen last week stuck to her forecast for an increase in the US central bank's key interest rate later this year, as the economy picks up pace.
A rise in interest rates will attract investors to the dollar because of the prospect of higher returns, driving up the currency's value.
Since oil is priced in dollars, a stronger US currency makes the commodity more expensive, denting demand and putting downward pressure on prices.
"Despite worries over Greece and the China stock sell-off, the Fed reiterated its intention to raise rates in 2015," Singapore's DBS Bank said in a market commentary.
"With Greece finally working with its creditors on a third bailout package, focus returned to monetary policy divergences," it said, referring to other countries planning to hold down interest rates.
Research house Capital Economics said "our expectation is that the dollar's strength will continue over the next year and a half, given the contrast in the prospects for monetary policy in the US and its major trading partners".
The return of Iranian oil "is adding bearish pressure as the market is trying to price in the crude expected to be introduced by the end of the year", said Ang.
Iran and six world powers last week agreed a deal curbing Tehran's nuclear programme that aims to prevent it building an atomic bomb.
In return the West will lift crippling economic sanctions and allow Iran to ramp up crude exports.
"The prospect of ongoing oversupply on the oil market if Iran resumes its supply is continuing to weigh on prices," said Commerzbank analysts in a note to clients.
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