By Sarah McFarlane
Oil prices edged off a 2 1/2 -year high on Tuesday, after supply disruptions eased in the North Sea and Libya, while rising tensions in major oil exporter Iran underpinned the market.
Light, sweet crude for February delivery fell 5 cents, or 0.1%, to $60.37 a barrel on the New York Mercantile Exchange. Brent, the global oil benchmark, lost 30 cents, or 0.4%, to $66.57 a barrel.
The resumption of oil flows in pipelines in the North Sea and Libya was offset by concern that antigovernment protests in Iran could disrupt production there.
Iran is facing its sixth day of demonstrations in some of the country's most widespread street protests in nearly a decade, with protesters demanding an end to the Islamic Republic regime and a change in leadership.
"I don't think we're seeing much immediate risk from these protests which are taking place in urban areas but I think it's the backdrop -- both political and in the oil market -- that mean these are catching attention," said Richard Mallinson, analyst at consultancy Energy Aspects.
The unrest in Iran comes as oil prices have been steadily climbing, aided by supply disruptions, along with efforts by the Organization of the Petroleum Exporting Countries to curb output and drain global stocks. Iran is OPEC's third-largest producer.
Growing political tensions in other major oil producers including Venezuela and Saudi Arabia also have added a risk premium to oil prices, analysts said.
"Geopolitics is going to be much more in focus now that we're in a tighter market," Mr. Mallinson said.
Oil demand is expected to come closer to matching oil supplies in the second half of the year, after more than three years of excess supply bolstering global stocks.
"The first quarter should be the weakest data of the year in terms of the weakest demand for crude oil due to refinery maintenance...it's in the second half of the year that it should tighten," said Olivier Jakob, managing director of PetroMatrix, an oil research firm in Switzerland.
Gasoline futures fell 1.8% to $1.7631 a gallon, and diesel futures declined 0.5% to $2.0584 a gallon.
--Stephanie Yang contributed to this article.
Write to Sarah McFarlane at [email protected]