Crude oil futures slipped 0.75 percent to Rs 4,101 per barrel on January 14, as participants trimmed their positions ahead of the signing of the so-called Phase One of the US-China trade deal, which will be vital to gauging the direction of the market.
Brent futures for March settlement was 13 cents higher at $65.11 a barrel on the ICE Futures Europe Exchange after losing 5.3% last week.
Thin U.S. refinery margins for petroleum products have negatively impacted crude prices, particularly as winter demand for heating oil has disappointed suppliers and gasoline margins have weakened, analysts told Reuters.
Crude oil briefly jumped above $70/bbl (Brent) on two occasions this past week as concerns over a potential war in the Middle East, raised the spectre of widespread damage to oil supply and spare capacity.
West Texas Intermediate crude was marginally down 0.34 percent to $57.88 per barrel, while Brent crude, the worldwide benchmark, slipped 0.17 per cent to $64.09 per barrel. It lifted its Brent crude price forecast by 7.1% to $64.83 for 2020.
Elsewhere, Saudi Arabia's energy minister Prince Abdulaziz bin Salman said his country will work for oil market stability at a time of heightened US-Iranian tension and wants to see sustainable prices and demand growth.
A U.S. -China trade deal is due to be signed in Washington on Wednesday.
From a positioning perspective, the balance of price risks has shifted to the downside, with funds already holding a lot of bullish positions and vulnerable to disappointing economic news or any easing of tensions around the Gulf.
"Regardless whether the deal is signed, we might have a buy the rumors, sell the fact scenario unfolding", he added.
The recent declines followed investors unwinding bullish positions built following the killing of a senior Iranian general in a US air strike in Iraq on January 2 which sent oil prices to a four-month high, said Harry Tchilinguirian, global oil strategist at BNP Paribas in London.
According to Reuters, the increase in tensions across the Middle East after the killing of an Iranian general by a US air strike, hedge fund managers added only modestly to their bullish position in petroleum last week. But they slumped again as Washington and Tehran retreated from the brink of direct conflict last week. But the missile attacks on the Iraqi airbases did not kill anyone and US President Donald Trump stood down from escalating his fight with Iran, easing geopolitical tensions in the Middle East, which often send oil prices higher.