Brent crude settled slightly lower on Monday, paring losses as traders questioned how soon a nuclear deal between world powers and Iran could translate into higher supplies to global markets.
After trading down as much as $3 a barrel earlier in the session, the international benchmark swung higher in late activity, sending Brent's premium to U.S. oil to fresh 8-month highs over $17 a barrel, before settling down just five cents.
Bearish sentiment following news of the weekend deal between the West and Tehran, which halts Iran's most sensitive nuclear activity and suspends some sanctions by the United States and the European Union, was overcome late in the day by perceptions that it would not mean an immediate return of Iranian oil to markets.
Tough sanctions against Iran over Tehran's nuclear program over the past two years have slashed exports from the OPEC member by more than half, keeping Brent above $100 a barrel.
"I think when people stepped back and looked at it, it doesn't seem as if we're on the verge of seeing Iranian supplies in the market," said Gene McGillian, analyst, Tradition Energy in Stamford, Connecticut, who noted support was also coming from ongoing supply outages from OPEC member Libya.
In the meantime, Iran is deploying more vessels to help store oil at sea and to enable it to conclude discreet sales by transferring cargoes to customers' ships in mid-ocean without having to enter port, trade sources familiar with the matter said.
For full coverage of the accord click on
Brent fell 5 cents to settle at $111.00 a barrel, after dropping to as low as $108.05 earlier in the session.
U.S. crude gave up 75 cents to settle at $94.09 a barrel, with analysts noting that rising stockpiles of crude in the United States continued to weigh on the contract relative to Brent.
Brent's premium to U.S. futures hit $17.41 a barrel in late activity, widest level since March, before settling at 16.91.
U.S. RBOB gasoline futures led the oil complex lower following news that Phillips 66's Bayway refinery in New Jersey had returned from maintenance on a gasoline unit. The front-month RBOB contract traded down more than 1 percent in late activity.
Oil traders were also eyeing fresh violence in Libya, where exports have been running at a fraction of the levels seen earlier this year of more than 1 million barrels per day.
Libyan troops struggling to establish control across the country clashed with militants in the eastern city of Benghazi on Monday and at least nine people were killed in the fighting.
(By Jeanine Prezioso; Additional reporting by Joshua Franklin in London and Sudip Kar-Gupta in London, Manash Goswami and Jacob Gronholt-Pedersen in Singapore; Editing by James Jukwey, Jane Baird, Bob Burgdorfer and Chizu Nomiyama)