September Brent crude futures fell 46 cents, or 0.6 percent, to $74.51 a barrel by 0356 GMT after rising almost 1 percent on Monday. The September contract, which expires later on Tuesday, settled at $74.25.
Trump said at a press conference he would be willing to meet Iranian President Hassan Rouhani about a week after he warned of unspecified "consequences" if the Persian Gulf nation continues threatening the U.S. Still, hours after Trump's comments, Secretary of State Michael Pompeo laid out preconditions for the meeting between U.S. and Iranian leaders.
On Tuesday, U.S. crude was down more than $1 a barrel to about $69, on pace for a roughly 7 percent decline this month.
Supporting prices is the possibility that the United States might re-impose sanctions on Iran, OPEC's third-largest producer, which could result in further supply reductions from the Middle East. OPEC production reached a 2018 high in July, a Reuters survey found on Monday. Saudi production increased but was offset by a decline in Iranian supply due to the restart of USA sanctions, the survey found.
Oil prices jumped Monday as markets weighed OPEC production hitting its highest level this year against a war of words between the USA and Iran. Workers in three oil fields in the North Sea started shutting down output before industrial action planned for Monday, while some tankers altered course after Saudi Arabia suspended crude shipments through a key Red Sea transit route.
Iran Dismisses Possibility of Holding Talks with U.S.
Iranian authorities investigating possible profiteering in vehicle and mobile-phone imports have also stepped up their arrests. The rial has lost more than half its value against the dollar in just four months.
"We expect prices will largely remain range-bound in the second half of 2018 and 2019".
After yet another surprise report-this time of an inventory build-from the American Petroleum Institute weighed on prices yesterday, the Energy Information Administration confirmed a build, reporting USA crude oil inventories had added 3.8 million barrels last week.
OPEC, together with Russian Federation and a group of other producers, last November extended an output-cutting deal to cover all of 2018. "Overall, I think the market is in the process of stabilizing".
A volley of sabre-rattling tweets had raised tensions in oil markets, which are already concerned about supplies as USA sanctions coming back into force in November aim to choke off Iranian oil exports.
Analysts polled by IG Group had expected a slight inventory decline of 200,000 barrels, after the previous week's major, 6.1-million-barrel draw reported by the EIA.
The biggest drop in production was in Iran-by 100,000 bpd, as US sanctions loom, serving as a deterrent for buyers, the Reuters survey found. "Even though trade war worries were eased between the US and European Union this week, they still loom large with China, weighing on prices".