Crude retreats on lack of immediate supply threat; Brent down 55 cents at $68.36/b

London — Crude oil futures were trading lower in the early afternoon session Tuesday on profit-taking and traders adopting a more cautious stance amid the absence of any supply disruption in the Middle East.

At 1330 GMT, front-month ICE Brent March crude futures were down 55 cents/b from Monday's settle at $68.36/b, while the front-month NYMEX February light sweet crude futures contract was trading 47 cents lower at $62.80/b.

Crude futures had been rising sharply over the last couple of trading days -- with Brent even trading about $70/b Monday morning -- following the killing of Iranian General Qassem Soleimani by a US air strike Friday.

"With such geopolitical risk, the market is going to be particularly volatile," Sucden analyst Geordie Wilkes said. "Iran said it would retaliate and the US said there is an increased risk to shipping activities, but Europe heads of state are trying to de-escalate the situation -- if Iran target the strait of Hormuz, there will be huge disruption to supply but at the same time the US is producing a record amount of oil, Russia producing a lot of oil, and OPEC has already be trying to reduce production through cuts," he added.

According to Commerzbank analyst Carsten Fritsch, oil prices have fallen back from Monday's highs likely as a result of profit-taking.

"Because the crisis between the US and Iran did not escalate any further yesterday, and because there have been no disruptions to the oil supply as yet, some market participants are likely to have squared their long positions," Fritsch said Tuesday. "It is too early to sound an all-clear, however. Iran is allegedly assessing 13 scenarios for retaliating against the US...US President Trump has already threatened to target 52 sites in Iran," he added.

According to S&P Global Platts Analytics, without new and significant news on a prolonged supply disruption or news to bolster the risk premium -- be it from the US-Iran standoff or elsewhere, for instance, from Iraq or Libya -- fundamentals point to weakening prices in the coming months and further risk premium may be exhausted.

Meanwhile, OPEC officials told S&P Global Platts that the bloc is prepared to respond to any supply emergency by reversing its production cuts, if necessary.

--Virginie Malicier, virginie.malicier@spglobal.com

--Edited by James Leech, james.leech@spglobal.com