Oil fell Monday on hopes tension over OPEC member Iran's nuclear ambition will ease after Tehran made an unprecedented move to contact Washington.
U.S. light crude for June delivery settled down 42 cents at $69.77 per barrel while June Brent crude shed 74 cents to $70.21 a barrel.
U.S. crude oil futures had fallen as low as $68.25 a barrel in intraday trade on word of the letter Iranian President Mahmoud Ahmadinejad had written to U.S. President George W. Bush which helped ease trader concern on the standoff over Tehran's nuclear program.
"In this letter, he has given an analysis of the current world situation, of the root of existing problems and of new ways of getting out of the current vulnerable situation in the world," Iranian government spokesman Gholamhossein Elham said.
The letter is the first publicly announced personal communication from an Iranian premier to a U.S. president since ties between the two countries were broken after the 1979 Islamic revolution.
The United States has led international action against Iran's nuclear plan, which it says is aimed at building atomic weapons. Tension over the program helped push U.S. oil prices to record highs over $75 a barrel last month.
Iran says it needs nuclear fuel for civilian use and has reacted defiantly to the possibility of any U.N. resolution demanding it halt its program. At the weekend, it reissued a threat to leave the nuclear Non-Proliferation Treaty.
Analysts were cautious over impact of the letter.
It's good to see oil prices drop a little, but can you trust Iran's intent? It's not like these guys are the most open and honest people out there. Fill up when the price of gas reflects this drop in oil, but be ready for another increase.