At 11:14 am (0314 GMT), New York's main contract, light sweet crude for delivery in April, was down two cents to 62.39 dollars from its close of 62.41 dollars in the United States on Monday, when it lost 1.26 dollars.

"The geo-political news from Iran is not as hot anymore," said Victor Shum, an analyst with Purvin and Gertz.

The possibility of a deal between the International Atomic Energy Agency (IAEA) and Iran has reduced the geo-political risk premium and removed the threat of a stoppage of oil from Iran, Shum said.

The board of the UN nuclear watchdog, the IAEA, began a meeting on Monday to consider an IAEA report that says Iran is defying its calls to halt uranium enrichment and to cooperate fully with agency inspectors.

The meeting could be a prelude to the UN Security Council's taking steps against Tehran but IAEA chief Mohamed ElBaradei said he hoped an agreement could be reached soon to ease Western fears over Iran's nuclear program and avert punitive UN action.

"This reduces fears about an Iranian crude supply cut and the market is just reacting to that," Shum said.

Iran exports 2.6 million bpd and is the second-biggest producer in Opec, the Organization of Petroleum Exporting Countries.

At another gathering in Vienna, Opec was expected to maintain current quotas.

Phil Flynn at Alaron Trading said traders believed Opec would not cut production with prices at current levels.

"Opec has made it clear (that) ... as long as oil prices are above 60 dollars they are fine, they won't cut production," Flynn said.

"But I think if we see oil prices continue to fall to below 60 dollars, there's a good chance that they would cut production."

The cartel should maintain its production ceiling in order to cool off high prices, Kuwaiti Energy Minister Sheikh Ahmad Fahd al-Sabah said Monday.

"I believe that because of the ... (high) price, we have to maintain our production. I believe that the prices are still high. For that we have to help prices to be more stable," he told reporters.