Oil steady as supply glut offsets European optimism

By Simon Falush

LONDON (Reuters) - Oil prices held steady on Tuesday, as a glut in supply offset an improvement in sentiment due to better European economic data and optimism a deal will be done between Greece and its creditors.

Oil prices recovered some of their earlier losses, briefly moving into positive territory as European shares climbed to a three-week high on expectations of a Greek deal.

Brent crude was down 9 cents at $63.25 a barrel at 0814 GMT, after closing the previous session up 32 cents.

U.S. crude for August delivery fell 35 cents to $60.03 a barrel. The July contract, which expired on Monday, closed up 7 cents at $59.68 a barrel.

Strong European economic data helped put a floor under prices despite a heavy global surplus of oil.

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 U.S. crude stocks also helped support prices.

Analysts expect U.S. 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 U.S. stocks on Tuesday at 2030 GMT, while the U.S. 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, a move that would likely lift Western sanctions.

Iranian Foreign Minister Mohammad Javad Zarif said he saw a good chance of reaching a final agreement with six world powers on Iran's nuclear programme by a June 30 deadline or a few days later, provided there was political will.

(Additional reporting by Keith Wallis in Singapore; Editing by Dale Hudson)