Brent holds near $111 as timing of rise in Iran oil exports unclear

SINGAPORE: Brent futures held near $111 a barrel on Tuesday as supply concerns crept back, with investors judging the historic deal between Iran and world powers would not result in an immediate increase in shipments from the OPEC member.

The deal halts Iran's most sensitive nuclear activity and suspends some sanctions by the West, but caps exports from the country at the current level of about 1 million barrels per day (bpd). That means a fragile supply-demand balance as markets also cope with oil export losses from Libya.

Brent crude slipped 22 cents to $110.78 a barrel by 0744 GMT. It plunged as much as $3 in the previous session, but recouped most of those losses to end 5 cents down. U.S. oil rose 39 cents to $94.48.

"The deal is weighing on prices, but it is just the first step and it is too early to tell how much more Iranian oil will come back to the market," said Tetsu Emori, a commodities fund manager at Astmax Investments. "Prices are likely to stabilize now as other fundamental factors out there start to weigh in."

Indeed, Iran is quietly 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.

"We saw a knee-jerk reaction in the markets as crude oil prices plummeted when trading commenced on Monday," analysts at Phillip Futures said in a note. "Markets were caught off-guard, as no deal in the previous talk coupled with Iran's persistence to continue with their uranium enrichment program had signalled that a deal is unlikely to be seen at least in the near term."

Emori of Astmax Investments expects both the benchmarks to hold around current levels, with lingering supply-side issues supporting prices as investors gauge the global demand outlook once more clarity emerges on when the U.S. Fed will roll back its monetary stimulus.

Latest data from the United States showed that contracts to buy previously owned U.S. homes hit a 10-month low in October. The U.S. central bank has targeted housing as a channel to boost growth and speed up job creation, and it noted at last month's meeting that the housing sector recovery had slowed somewhat in recent months.