Oil holds near $111, timing of rise in Iran exports unclear

Investors judge deal will not immediately increase crude oil supplies

Oil held near $111 a barrel on Tuesday as investors judged the historic deal between Iran and world powers would bring no immediate increase in crude oil supplies from the OPEC member.

The deal halts Iran's most sensitive nuclear activity and suspends some sanctions by the West, but caps Iran's exports at the current level of about 1 million barrels per day (bpd).

That means supply concerns continue to affect the market amid disruptions to oil exports from Libya.

Front-month Brent crude slipped 39 cents to $110.61 a barrel by 0850 GMT. It had plunged as much as $3 in the previous session but recouped most of those losses to end 5 cents down. US oil rose 44 cents to $94.53.

"Prices recovered very rapidly yesterday but they are heading down again now," Christopher Bellew, trader at Jefferies Bache, said. "There will be slightly more Iranian crude in the market. Not much, but more. We'll probably see prices go back down to $109."

Iran is mobilising more ships to store and transport oil, aiming to keep its fields working and mitigate losses of several billion dollars a month as sanctions remain in place for at least another six months.

US STOCKPILES

Tetsu Emori, commodities fund manager at Astmax Investments, sees both benchmarks holding around current levels, with supply-side issues supporting prices. Investors will gauge the global demand outlook once more clarity emerges on when the US Federal Reserve will taper monetary stimulus.

"Prices are likely to stabilise now as other fundamental factors out there start to weigh in," Emori said.

Oil, particularly the US benchmark, was supported by expectations that distillate stocks, which include heating oil and diesel fuel, dropped by 800,000 barrels last week, indicating a pick-up in demand in the world's top oil consumer.

The expected fall is overshadowing a forecast of a rise in crude stocks, by 800,000 barrels for the week ended November 22.

Industry group American Petroleum Institute (API) will release its numbers later in the day, followed by the official US Energy Information Administration data on Wednesday.

A drop in Libya's exports to a fraction of its capacity is also supporting oil.