Oil $1 lower as Iran jitters ease

Iran's top nuclear negotiator wants to resolve the dispute peacefully

The price of oil has dipped by $1 after Iran said it had sent a letter to the US, prompting hopes the West's nuclear row with Iran may be nearing an end.

US light crude for June dropped by $1.10 to $69.10 per barrel, while Brent crude fell $1.06 to $69.89.

The letter follows weeks of tension prompted by US claims that Iran was developing nuclear weapons, a statement that Iran has repeatedly denied.

Traders had feared US sanctions could threaten Iran's oil supply.

A spokesperson for Iran's government said that the letter, from Iran's president Mahmoud Ahmadinejad to US President George W Bush, had addressed the nuclear conflict.

But he did not reveal whether it proposed direct communication with the US.

International concerns

Members of the United Nations Security Council are expected to meet in New York on Monday night to debate how to proceed with Iran.

Meanwhile, the head of the International Energy Agency, Claude Mandil, has said that high demand for oil - coupled with restricted supply - means oil prices will remain high for the next two to three years.

"[Oil companies] have not invested enough for the past 20 years," Mr Mandil said during a press event in Australia.

Recent developments that have upset energy markets include Bolivia's sudden decision to nationalise its gas fields.

Venezuela's announcement that it has decided to almost double taxes on foreign oil companies operating in the country has also rattled sentiment.