Oil Slides Below $65

A combination of profit-taking and signs that Britain and Iran might peacefully resolve their diplomatic standoff sent energy futures to a lower close Tuesday.

The May light sweet crude contract slipped $1.30 to $64.64 a barrel on the New York Mercantile Exchange. Reformulated gasoline was down 4 cents at $2.02 a gallon, and heating oil fell 2 cents to $1.84 a gallon.

The near-term natural gas contract was 24 cents lower at $7.43 per million British thermal units.

Nervousness among energy traders appeared to ease slightly after U.K. Prime Minister Tony Blair called for talks to end his country's dispute with Iran over 15 British troops detained by the Iranian navy on March 23.

Ali Larijani, chief of the Iranian National Security Council, said overnight that he was hopeful that the issue would be solved through negotiation.

Strong rhetoric in the preceding days had increased concerns among energy traders of a possible disruption in oil supplies from the Middle East. Iran sits immediately above the Strait of Hormuz, through which nearly 20 million barrels pass daily on cargo ships.

Iran has threatened to blockade the strait if it is threatened militarily by the U.S., Britain or Israel.

Regardless of the latest session's decline, crude prices probably won't be falling much further any time soon, according to Brandon DiTullio, a commodities broker at Nextsource Trading in Irvine, Calif.

To support his claim, DiTullio referred to a recent report by the International Energy Agency stating that global oil demand alone suggests a global crude oil price near $60, even without the geopolitical tension in the Middle East.

"In recent weeks the market has priced in a terror premium on oil near $6 a barrel. A year ago, during Israel's war in Lebanon, the terror premium was closer to $10. We think that the bottom support level for crude is around $62. We also won't be surprised if crude reaches $70 in the next few weeks," DiTullio said.