Brent crude edged higher in choppy trade on Tuesday, recovering from a 17-month low and drawing support along with U.S. crude from deadlocked talks to defuse the dispute over Iran's nuclear program and also bolstered by hopes for more monetary stimulus.
Brent fell sharply before Spain managed to sell debt at its latest auction, then steadied even though Spain's borrowing costs rose and the threat of a spreading debt crisis lingered as Greek political parties tried to form a government.
U.S. crude bounced after finding support again near the $82 a barrel level, also receiving support as Wall Street stock indexes rose on hopes for more monetary stimulus from the U.S. Federal Reserve.
Iran and six world powers blamed each other for deadlock at talks on Tehran's nuclear program, as negotiators struggled for a breakthrough that will reduce the risk of a new Middle East war.
"The market has rebounded on worries about the outcome of the nuclear talks in Moscow and a general rebound in the risk sentiment," Thorbjorn bak Jensen, oil analyst with Global Risk Management, said.
The Fed's Federal Open Market Committee will release a policy statement on Wednesday at the end of a two-day meeting. Investors continue to hope the Fed will unveil some form of additional stimulus to support a flagging recovery.
Brent August crude edged up 17 cents to $96.22 a barrel by 1:25 p.m. EDT (1725 GMT), after falling to $94.44, the lowest intraday price since Jan. 10, 2011.
U.S. July crude was up 72 cents at $83.98, having traded from $82.28 to $84.41 ahead of the July contract's expiration on Wednesday.
U.S. August crude was up 73 cents at $84.33 a barrel.
Brent's premium to U.S. crude <CL-LCO1=R> slipped and hovered near $11.85 based on August crude prices. The $11.63 low was the weakest the premium has been since the end of January.
The spread has narrowed in reaction to the mid-May reversal of the Seaway pipeline, allowing U.S. crude to be brought from the Cushing, Oklahoma, storage hub to the refinery-rich Gulf Coast.
Enbridge Inc said late on Monday that it expects to complete an expansion of the newly reversed pipeline by the end of the year.
The most recent U.S. government oil data showed the total crude stocks fell and inventories at Cushing, delivery point for the U.S. light sweet crude contract, fell in the week to June 8, with the Cushing stocks slipping from a record high level.
Ahead of weekly reports from industry and government, crude stocks are expected to have fallen last week, a Reuters survey of analysts on Monday showed.
Data from industry group the American Petroleum Institute is due at 4:30 p.m. EDT (2030 GMT) on Tuesday, with U.S. Energy Information Administration data following on Wednesday.
TENSIONS ABOUT IRAN
Diplomats said negotiators remained far from agreement on Iran's nuclear program late in the second day of talks in Moscow between Iran and six major powers: the United States, China, Russia, Germany, France and Britain.
The talks are aimed at defusing a dispute over Tehran's nuclear work, which the United Nations and the West fear is designed to produce nuclear arms. Tehran has repeatedly denied the assertion.
Separately, Russia and Syria denied an Iranian media report that Syria would host Russian, Chinese and Iranian military forces for joint exercises.
Iranian news agency Fars said 90,000 troops and hundreds of ships, tanks and warplanes from the four countries would take part in the war games on land and sea in Syria soon.
Syria's turmoil, Egypt's uncertain election outcome and border clashes between Israel and Palestinians in the Gaza Strip highlighted the potential for oil supply disruptions resulting from conflicts in the oil-rich region.