Crude prices declined in volatile trading on Thursday as investors assessed the potential for new supply in tight markets amid prospects of a new Iran deal.

Brent futures were down 15 cents, or 0.12%, at $121.45 a barrel, after falling more than $1 earlier in the session.

U.S. West Texas Intermediate futures fell 75 cents, or 0.65%, to $114.18 a barrel at 0729 GMT, after shedding over $2 earlier.

The contracts had gained $2 and $1, respectively, in morning trade.

White House national security adviser Jake Sullivan said on Wednesday the United States and its allies have made progress in Iran nuclear talks but issues remain. read more

"A lifting of Iranian export restrictions would help alleviate the immense tightness prevalent in crude markets right now," consultancy JBC Energy said in a note.

Iran is already preparing for a ramp-up in exports, and the state refiner NIOC has reportedly started to reach out to former key customers in India and South Korea, the note added.

Both contracts have posted steep gains this week, with Brent futures up more than $14 a barrel, or 13%, since Monday and WTI climbing over $10 a barrel, or 10%, as worries over supply disruptions intensified following Russia's invasion of Ukraine.

Oil markets jumped more than 5% on Wednesday following reports that crude exports from Kazakhstan's Caspian Pipeline Consortium (CPC) terminal had completely halted following storm damage. Russia's deputy prime minister said oil supplies could be stopped for two months. read more

U.S. President Biden is meeting with NATO allies on Thursday and is expected to announce additional sanctions on Russia over its actions in Ukraine, which Moscow calls a "special operation".

Meanwhile, stockpiles in the United States fell by 2.5 million barrels last week while inventories from the U.S. Strategic Petroleum Reserve declined by 4.2 million barrels, according to data from the U.S. Energy Information Administration. Market participants had expected a modest increase in supplies.

U.S. oil production remained flat at 11.6 million barrels per day, according to EIA data.

"Though the overall undertone remains quite bullish, $115 per barrel is still a hurdle area for the WTI crude and unless that is taken out convincingly, prices look to witness a breather," said Sugandha Sachdeva, vice president, commodities at Religare Broking.

Reuters