Oil edges up as Europe optimism offsets supply glut

[LONDON] Oil prices edged up on Tuesday as strong European economic data and optimism a deal will be struck between Greece and its creditors offset the impact of a supply glut.

Prices recovered after falling earlier in the session, moving into positive territory as European shares climbed to a three-week high on expectations of a Greek deal.

Brent crude was up 10 cents at US$63.44 a barrel at 1005 GMT, after closing the previous session up 32 cents.

US crude for August delivery fell 14 cents to US$60.24 a barrel. The July contract, which expired on Monday, closed up 7 cents at US$59.68 a barrel.

Strong European economic data supported prices despite a heavy global surplus of oil which has led to millions of barrels being afloat at sea as sellers struggle to find buyers for cargoes.

France's manufacturing sector expanded in June for the first time since April 2014, while Germany's private sector grew at a faster rate in June than in the previous month. "The data from France and Germany show there are flickers of life in the European economy, but strong supply is likely for some time to come, meaning subdued oil prices," said Michael Hewson, chief market analyst at CMC Markets.

Expectations for a weekly drawdown in US crude stocks also helped support prices.

Analysts expect US commercial crude oil stocks to have dropped by an average of 1.8 million barrels to around 466 million barrels last week.

The American Petroleum Institute, an industry group, will release its data on US stocks on Tuesday at 2030 GMT, while the US government's Energy Information Administration will publish its own inventories data on Wednesday at 1430 GMT.

Investors are also watching to see the speed with which Iran could increase oil exports if there is a deal between Tehran and six world powers over Iran's nuclear programme, which would likely lead to the lifting of Western sanctions.

Iranian Foreign Minister Mohammad Javad Zarif said he saw a good chance of reaching a final agreement by a June 30 deadline or a few days later, provided there was political will.

REUTERS