Brent crude rose towards 107 dollars a barrel on Tuesday after slipping in the previous session as Libyan supply picked up and a restart of Iranian oil shipments get closer.
Recent weak U.S. economic data has also dampened the outlook for fuel demand in the world’s largest oil consumer.
The February Brent crude contract, which expires on Thursday, was up 20 cents to 106.95 dollars a barrel, after closing down 0.47 per cent in the previous session.
“February Brent has been squeezed, but broadly the contract is firmly in 106 to 108 dollars range at the moment,” said Christopher Bellew, a broker at Jefferies Bache.
U.S. crude was at 92.14 dollars, up 34 cents after settling at a two-session low on Monday.
Major Powers and Iran have moved a step closer to resolving a long standoff over Tehran’s nuclear ambitions after endorsing a deal that will come into force on Jan. 20.
The parties are likely to start talks on a final settlement in February, a diplomatic source said on Monday.
A resolution of the issue could see the West lift sanctions on the OPEC producer’s oil exports, increasing global supply.
“Besides a gloomier demand outlook in the wake of poor U.S. labour market data, growing supply is weighing on prices,” said a Commerzbank in a research note.
Libya’s production has also risen to 600,000-650,000 barrels per day (bpd), with output at the El Sharara field back up to 300,000 bpd, its oil minister said.
Wrecked by months of domestic protests, the OPEC producer’s output is still below the 1.2 million bpd it was turning out in July.
Britain’s biggest oilfield, Buzzard, where an outage last week temporarily boosted Brent, is expected to return to normal output in coming days, its operator Nexen said on Monday.
“Prices could come under further pressure if oil product stockpiles rose in the United States.
“This trend reinforces concerns over lower demand after it posted the weakest monthly jobs growth in three years in December,’’ Hasegawa said.
Analysts in a preliminary Media poll said U.S. crude inventories likely rose last week for the first time in seven weeks, up by an average of 500,000 barrels.