Oil fell below $70 on Monday on hopes that tension over Tehran's nuclear ambitions will ease after Iran said its president would send a letter to President Bush.
US light crude for June delivery lost 34 cents to $69.85 a barrel by early this morning, erasing gains from late Friday. London Brent crude fell 39 cents to $70.56 a barrel.
Prices are more than $5 below their record highs touched two weeks ago but up about 15 per cent since the start of the year.
An Iranian official said on Monday that President Mahmoud Ahmadinejad would send a letter to Mr Bush, to be delivered to the Swiss Embassy in Tehran, which represents US interests in Iran.
"In this letter, he has given an analysis of the current world situation, of the root of existing problems and of new ways of getting out of the current vulnerable situation in the world," an Iranian government spokesman said.
Analysts were cautious over the impact of the letter on oil prices, however.
They are also expecting gasoline supplies in the United States to tighten ahead of the summer driving season late this month, despite a surprise stock-build last week, which helped drive down oil prices by more than 6 per cent.