Brent futures rose above $116 on Tuesday, underpinned by supply concerns after the European Union slapped more sanctions on Iran, while ample supplies and healthy inventory in top consumer the United States capped gains.
The European Union cranked up pressure to force Tehran to halt its disputed nuclear programme with further sanctions on Iran's banking, shipping and industrial sectors. The measures came days after the Islamic Republic said it would negotiate on halting higher-grade uranium enrichment if given fuel for a research reactor.
Front-month Brent crude, due to expire later in the day, gained 32 cents to $116.12 a barrel by 0625 GMT, after settling up $1.18. U.S. oil gained 21 cents to $92.06. Fundamentally there is no shortage of oil, with Saudi Arabia and others maintaining high output while inventory levels are also good, said Ken Hasegawa, a commodity sales manager with Newedge in Tokyo.
On the other hand, there is tension in the market with what is happening in Iran and the Turkey-Syria issue. That has put a floor on prices.
The twin factors of ample supply and worries over a worsening crisis in the Middle East will keep oil well balanced unless the geopolitical situation worsens, Hasegawa said. He expected Brent to trade between $110 and $118 in the short term, for the next 10 days, with U.S. oil in an $88-$95 range.
The recent sanctions, one of the EU's toughest moves against Iran to date, reflect mounting concerns over the nuclear programme and also Israeli threats to attack Iranian atomic installations if a mix of sanctions and diplomacy fails.
Iran maintains that its nuclear project has only peaceful energy purposes and has refused in three rounds of talks since April to scale back uranium enrichment unless major economic sanctions are rescinded.
Brent was also supported by a possible delay in the restart of Britain's largest oilfield after maintenance, further hurting shipments of oil that sets the benchmark.
That helped the contract's premium oil rise to $23.95 on settlement in the previous session.
Brent prices were supported by further delays in the restart