Oil Prices Swing With Geopolitical Risks Still in Focus

Oil prices swung between small gains and losses Tuesday as investors reacted to some of the geopolitical concerns that have recently supported prices possibly easing.

U.S. crude futures pared losses late in the session after falling as much as 1.3% and closed up 1 cent, or less than 0.1%, to $51.88 a barrel on the New York Mercantile Exchange -- its third straight session of gains. Brent, the global benchmark, finished up 6 cents, or 0.1%, at $57.88 a barrel.

Concerns the conflict between Iraqi forces and forces from Iraq's semiautonomous Kurdish region in the oil-rich province of Kirkuk might crimp supply in the region have supported prices recently, though some investors and analysts said that buying was overdone. On Tuesday, Iraq's Oil Minister Jabbar al-Luaibi told The Wall Street Journal that production from Iraq's Kirkuk oil fields, seized by Baghdad from Kurdish forces Sunday, was running as normal.

Uncertainty about whether the U.S. will impose fresh sanctions on Iran has also boosted prices of late. Amir Zamaninia, Iran's deputy oil minister, said Tuesday the U.S. decertifying the 2015 nuclear deal wouldn't really impact the country's oil industry.

Doubts about how much those possible market risks will actually impact global oil flows fueled some profit-taking and intraday volatility, investors said.

"That risk premium that came into prices over the weekend is rapidly coming back out," said John Kilduff, founding partner at Again Capital.

Traders were still digesting news from Iraq, where Iraqi federal forces entered the disputed region -- which normally pumps 250,000 barrels a day -- in response to a Kurdish independence referendum.

In a statement posted on Iraq's oil ministry's website, Mr. Luaibi also said employees of a local state-run company were working to prevent the suspension of production and exports. He said Iraq now plans to boost production to more than one million barrels a day in cooperation with international companies.

The situation with Iran is also unlikely to be resolved soon, some analysts said. President Donald Trump last week refused to recertify the 2015 deal, punting a decision to Congress on whether to impose fresh sanctions on Iran.

The lifting of sanctions at the start of 2016 allowed Iran to significantly increase its production to around 3.8 million barrels a day.

Some analysts said buying in anticipation of possible supply risks might have been overdone, leading to Tuesday's price moves.

"I think the market is just taking a little bit of a rest from an overbought state," said John Caruso, senior trader at RJ O'Brien & Associates LLC.

Still, the global demand picture that has also supported oil prices recently remains intact, Mr. Caruso said.

Investors were awaiting an inventory report from the U.S. Energy Information Administration Wednesday for the latest production and export figures. Strong demand for U.S. crude has supported prices recently. However, concerns rising U.S. production will offset efforts from the Organization of the Petroleum Exporting Countries and other major producers to limit supply have limited oil's recent gains, analysts say.

Estimates from 10 analysts and traders surveyed by The Wall Street Journal showed that U.S. oil inventories are projected to have fallen by 3.2 million barrels, on average, in the week ended Oct. 13.

U.S. shale oil production is expected to increase by 81,000 barrels a day in November to a total of 6.12 million barrels a day, the EIA said in its monthly drilling productivity report Monday. ING analysts wrote in a Tuesday note that figure would be a record.

Gasoline futures closed up 1.32 cents, or 0.8%, at $1.6301. Diesel futures fell 0.31 cents, or 0.2%, to $1.8098 a gallon.

--Christopher Alessi contributed to this article.

Write to Amrith Ramkumar at amrith.ramkumar@wsj.com and Benoit Faucon at benoit.faucon@wsj.com