Oil prices stabilized on Tuesday as investors assessed supply disruption risks after Iran conducted naval exercises near the Strait of Hormuz ahead of nuclear talks with the United States later in the day.
US President Donald Trump said on Monday that he would participate "indirectly" in the Geneva talks, adding that he believed Tehran wanted to reach an agreement. Trump said at the end of the week that regime change in Iran would be the "best thing that could happen."
Brent crude futures fell 0.2 percent to $68.59 a barrel by 01:06 GMT, after rising 1.3 percent on Monday.
US West Texas Intermediate crude was at $63.73 a barrel, up 84 cents, or 1.34 percent, but that gain incorporated all price movement on Monday, as the contract was not settled that day due to the US Presidents Day holiday.
Many markets were closed on Tuesday for the Lunar New Year, including China, Hong Kong, Taiwan, South Korea and Singapore.
"The market remains jittery amid ongoing geopolitical uncertainty," Daniel Hynes, an analyst at ANZ Bank, said in a research note.
He added: "Should tensions in the Middle East ease, or tangible progress be made on the Ukrainian situation, the risk premium currently embedded in oil prices may quickly dissipate. However, any negative outcome or further escalation could be positive for oil prices."
Iran began military exercises on Monday in the Strait of Hormuz, a vital international waterway and a major oil export route from Gulf countries, which have called for diplomacy to end the conflict.
Meanwhile, Citigroup said that if Russian supply disruptions continue to keep Brent crude within a range of $65 to $70 a barrel in the coming months, OPEC+ is likely to respond by increasing production from spare capacity.
Three sources in OPEC+ said the organization is inclined to resume increasing oil production from April, as the group prepares for peak summer demand, and higher prices are reinforced by tensions over US-Iranian relations.
"We expect, in the base case, that two oil deals will be reached, one with Iran and the other with Russia and Ukraine, by or during the summer of this year, which will contribute to a decline in prices to $60-62 a barrel of Brent," Citigroup said.
