NEW YORK - Oil prices recouped some losses on Tuesday after U.S. President Donald Trump confirmed the U.S. will withdraw from the Iran nuclear deal, in a volatile session in which prices slumped as much as 4 percent earlier in the day.
Brent crude futures briefly turned positive after Trump said the U.S. will withdraw from a 2015 international agreement designed to deny Tehran the ability to build nuclear weapons and said the U.S. will institute the "highest level" of sanctions on Iran.
"As an energy investor, Trump announced everything that one could possibly have wanted him to say," said Eric Nuttall, partner and senior portfolio manager at Ninepoint Partners in Toronto.
"It gives one confidence that there could be a reduction in the physical movement of barrels and this also puts at stake the medium and long-term growth ambitions of Iran to grow their production and capacity."
Oil prices had been supported by expectations that Trump would pull out of the deal, which could hit Iranian crude exports and feed geopolitical tensions in the Middle East, home to a third of the world's daily oil supply.
Earlier in the session, prices plunged as media reports rattled markets with doubts about whether Trump would withdraw Washington from the deal as most had expected.
Brent crude futures <LCOc1> settled 1.7 percent lower at $74.85 a barrel while U.S. West Texas Intermediate (WTI) crude futures <CLc1> ended the session 2.4 percent lower at $69.06 per barrel.
Trading volumes in both contracts rose, with front-month WTI futures seeing more than 1.15 million contracts change hands, its busiest trading day since early July. More than 488,000 lots of front-month Brent crude futures changed hands, the highest since April 11.
During the session, prices fell as much as 4 percent, with U.S. crude hitting a session low of $67.63 a barrel and Brent touched $73.10 a barrel.
"Trump's announcement had been baked into the cake in recent days, hence we saw prices selling off today given the air of certainty surrounding it," said Matt Smith, director of commodity research at ClipperData.
"That said, the tough stance taken has helped prices pare losses into the close."
Under the deal to limit Iran's nuclear programme, formally known as the Joint Comprehensive Plan of Action, the United States agreed to ease a series of sanctions on Iran and has done so under a string of "waivers" that effectively suspend them.
Iran's exports since then have risen to about 2.5 million barrels per day and the country is the third-biggest producer among the Organization of the Petroleum Exporting Countries. Goldman Sachs said in a note that it was unclear if 1 million bpd in exports would be at risk as it was from 2012 to 2015. [nFWN1SF0LC]
Market participants said oil was also pressured by strength in the U.S. dollar, which advanced to its highest level of 2018 against a basket of currencies <.DXY> on safe-haven buying.
"If the dollar continues to rally from here, regardless of what Trump does with this Iran deal, any gains (for oil) are going to be short-lived as the greatest risk here is the risk of the dollar," said Brian LaRose, technical analyst at United-ICAP.
Meanwhile, U.S. crude oil output is expected to rise by 1.14 million bpd to 11.86 million bpd next year, the U.S. Energy Information Administration said.