Oil prices drop on hopes of easing Iran tensions

Oil prices dropped on Wednesday over hopes of easing tensions between major crude producer Iran and the West, but eurozone debt woes continued to cast a shadow over the market, traders said. New York's main contract, West Texas Intermediate crude for delivery in July, was down 89 cents to $90.96 a barrel. Brent North Sea crude for July shed $1.34 to $107.07 a barrel in midday deals in London. "Oil has slipped on news that Iran will let UN nuclear inspectors into the country," said Justin Harper, an analyst at traders IG Markets. International Atomic Energy Agency (IAEA) chief Yukiya Amano said that he and Iran's chief nuclear negotiator would "soon" reach an agreement on the UN watchdog probing Iran's suspected weapons activities. The announcement by Amano came ahead of talks in Baghdad later on Wednesday between world powers and Tehran aimed at defusing tensions over the Islamic republic's nuclear ambitions. The reaction of Western diplomats -- and Israel -- was cool, however. Israel and much of the West believe Tehran is developing atomic weapons and have imposed sanctions on its financial and oil industries in response. Iran vehemently rejects the accusations, insisting the programme is for peaceful purposes including cancer treatment. "It seems ahead of IAEA/Iran negotiations ... Western officials have blinked first," said Sucden brokers analyst Jack Pollard. "The implication in terms of a less constrained supply picture has translated into crude (price) weakness." Dealers are also keeping an eye on the eurozone debt crisis amid worries Greece could exit the 17-member currency bloc, analysts said. European shares dived and the euro hit a 21-month low point against the dollar on Wednesday before an informal EU summit and after the former Greek prime minister warned that Greece might leave the eurozone.