Oil prices steady as supply outweighs demand

Oil prices was flat on Tuesday as stronger European economic data and optimism a deal will be struck between Greece and its creditors offset the impact of a supply glut and a stronger dollar.

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 2 cents lower at $63.32 a barrel at 8.04 a.m. EDT, 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 supported prices despite a heavy global surplus of oil that 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.

A stronger dollar pressured the oil price. The dollar index was up 0.9 percent, while the euro shed more than 1 percent against the greenback. Oil, denominated in the U.S. currency, becomes less affordable to holders of other currencies when the dollar strengthens.

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 4.30 p.m. EDT, while the U.S. government’s Energy Information Administration will publish its own inventories data on Wednesday at 10.30 a.m EDT.

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 program, 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)