Oil edges higher above $83, market eyes Iran talks

The price of oil edged higher above $83 a barrel Tuesday as traders closely watched talks between Iran and six world powers over the Middle Eastern country's nuclear program and developments in the eurozone debt crisis.

By early afternoon in Europe, benchmark oil for July delivery was up 22 cents to $83.49 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 76 cents to settle at $83.27 in New York on Monday.

In London, Brent crude for August delivery was down 15 cents at $95.90 per barrel on the ICE Futures exchange.

Uncertainty about the formation of a coalition government in Greece and rising yields on Spanish bonds kept markets on edge, with the Nymex contract falling to as low as $82.28 earlier in Tuesday's session.

"The economic conditions across the eurozone remain very fragile," said analysts at Sucden Financial in London.

Meanwhile, negotiators from Iran are in talks with counterparts from six world powers - the United States, Britain, France, Russia, China and Germany - in Moscow, the third such meeting in recent months.

On Monday, Iran became more adamant that the world must ease the sanctions choking off its oil sales before it will curb activities that could be used to make nuclear arms. But the six world powers insisted that Tehran take the first conciliatory step.

Crude has plunged from $110 in February as fears eased that the U.S. or Israel would attack Iranian nuclear facilities and disrupt global oil supplies. Signs of slowing economic growth and oil demand in the U.S., Europe and China have also pushed prices lower.

"Softening Iranian tensions and deteriorating fundamentals are responsible for the majority of the correction," Morgan Stanley said in a report. "New signs of emerging market weakness, in China in particular, present downside risks to global demand growth. A fall in Brent to the low $90s is possible."

Investors will also be monitoring fresh information on U.S. stockpiles of crude and refined products.

Data for the week ending June 15 is expected to show a decline of 600,000 barrels in crude oil stocks and a build of 600,000 barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

The American Petroleum Institute will release its report on oil stocks later Tuesday, while the report from the Energy Department's Energy Information Administration - the market benchmark - will be out on Wednesday.

In other energy trading, heating oil was down 0.2 cent at $2.62 per gallon while gasoline futures fell 0.9 cent at $2.58 per gallon. Natural gas gained 1.4 cents at $2.65 per 1,000 cubic feet.

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