SINGAPORE: Brent crude futures held steady near $120 a barrel on Tuesday as the euro zone approved a second bailout package for debt-laden Greece, while a cut in Chinese and European imports of Iranian oil supported prices.
Euro zone finance ministers struck a deal early on Tuesday to finance Greece with a 130-billion-euro rescue package, averting an imminent bankruptcy while also boosting the demand outlook for commodities.
Brent fell 1 cent to $120.04 by 0715 GMT after closing above $120 on Monday for the first time since June 15.
US crude was at $104.93, up $1.69, after touching $105.44 on Monday -- its highest since May 5. The New York Mercantile Exchange did not issue a settlement price on Monday because of a holiday and the contract expires on Tuesday.
Oil prices rose briefly on news of the much-awaited bailout deal for Greece while the euro jumped and Asian equities pared losses.
"There was a fair bit of positive news already priced in by markets," Ben Le Brun, a Sydney-based markets analyst at OptionsXpress, said.
The deal resolves Greece's immediate financing needs but seems unlikely to revive the nation's shattered economy.
"Scepticism remains as to whether Greek politicians will be able to deliver the reforms at the required pace, especially after the Greek elections in April," ANZ bank analysts said in a note.
But oil prices are expected to be supported as western sanctions bite into oil supply from Iran, OPEC's second largest producer.
Crude buyers globally are being pressured by the West to reduce Iranian imports, with the United States and the European Union imposing new economic sanctions targeted at reducing Tehran's oil revenue over its controversial nuclear programme.
Top Iranian crude buyer China will import less oil from Tehran this year, while European countries are also cutting purchases ahead of an embargo.
EU WEANS ITSELF OFF IRANIAN OIL
The euro zone has started weaning itself off Iranian oil ahead of an embargo on July 1 even as Iran said on Sunday it has halted exports to British and French companies.
Belgium, the Czech Republic and the Netherlands have stopped buying Iranian oil, while Greece, Spain and Italy are cutting back on their purchases, a Commission spokeswoman said.
An official from the International Energy Agency said the European Union could cope with an abrupt halt by Iran of oil exports to the region as buyers are already adjusting to the forthcoming ban on Iranian shipments.
Along with China, Iran's third largest customer Japan is also likely to reduce oil imports from Tehran to win waivers from US sanctions.
"With its current regime, Iran is always going to be considered a hostile nation by the West, so the long term solution maybe for countries to wean themselves off Iran's oil supply where possible," Le Brun said.
"While this is playing out it will create supply constraints and underpin support for the oil price."
The loss of supply from Iran, South Sudan, Yemen and Syria coupled with a recovering US economy and easing policy in China to support growth have lifted oil prices and investors' appetite for riskier assets.
Speculators raised net long positions in Brent crude oil in the week to Feb. 14 but cut their net long positions in gasoil, data published by the Intercontinental Exchange showed.
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