Iran-Crude oil prices
Crude oil fell from near a record after Iran said it gave a "constructive" response to the incentives package.

Futures climbed to a record $ 145.85 a barrel yesterday on speculation tension in the Middle East may worsen.

"For both sides to show they can give up something could calm down political risk in the area," said Thina Saltvedt, an analyst at Nordea Bank AB in Oslo.

Prices may "in the immediate term drop one or two dollars" if a compromise is reached.

Crude oil for August delivery fell $1.25, or 0.9 percent, to $144.04 a barrel in electronic trading on the New York Mercantile Exchange, as of 3:01 p.m.

Iran presented its reply "with a focus on common ground and a constructive view," Saeed Jalili, secretary of Iran's Supreme National Security Council, said in a telephone call with European Union foreign policy chief Javier Solana.

Tensions with Iran, which borders the Straits of Hormuz waterway used to channel 20 percent of world oil supply, may still send oil to $200, according to independent energy adviser Cornelia Meyer.

"Whatever happens in Iran, it will affect Iraq and it will also affect Saudi Arabia and Kuwait," Meyer said today in a Bloomberg Television interview.

It "would be difficult for OPEC to keep output stable since it is about the Strait of Hormuz, which is a geopolitical bottleneck."