Oil prices edged higher during Tuesday's Asian deals, although gains were limited as traders looked beyond easing geopolitical tensions in the Middle East and shifted their focus to recovering supply and the outlook for global demand.
By 2:55 pm AEST (4:55 am GMT), Brent crude futures had risen 50 cents, or 0.7%, to US$72.49 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 42 cents, or 0.6%, to US$68.97 a barrel.
Both Brent and WTI settled 0.2% lower in the previous session.
ANZ analysts said refined fuel markets continued to outperform crude despite prices retreating from their recent highs.
"Oil product markets remain significantly tighter than crude markets. Refining margins continue to strengthen, particularly in the U.S., as robust fuel demand collides with lean inventories and constrained product supply.
"Gasoline inventories are still drawing down while distillate and jet fuel stocks have only recently stabilised, creating ongoing support for crack spreads despite crude prices retreating to pre-conflict levels.
"And despite the recent surge in activity in the Strait of Hormuz, the recovery in oil flows is proving slower than expected.
"The initial rebound in tanker transits through the Strait of Hormuz has stalled, with vessel crossings remaining in single digits and no sustained recovery evident.
"While the interim U.S.-Iran agreement has reduced immediate geopolitical risks, shipping operators remain cautious, limiting the speed at which crude exports can return to normal levels."
Geopolitical developments remained in focus after U.S. President Donald Trump said on Monday the United States would either reach an agreement with Iran or "finish the job", renewing the threat of military action as Tehran continued to project defiance following the funeral of former Supreme Leader Ayatollah Ali Khamenei.
Markets have been closely monitoring negotiations between Washington and Tehran over shipping through the Strait of Hormuz while assessing the pace of recovery in Gulf oil exports.
According to Axios, citing two US officials, Iran's military fired at least two missiles at commercial vessels transiting the Strait of Hormuz on Monday night. The ships reportedly sustained significant damage, although no casualties were reported.
Separately, Reuters reported that Japanese-owned supertankers carrying Saudi Arabian crude were heading through the Strait of Hormuz on Tuesday, joining a fleet of previously stranded vessels that resumed their voyages a day earlier.
On the supply side, the United Arab Emirates increased crude production above 3.8 million barrels per day in June, its highest level since April 2020 and above pre-conflict levels, after departing from OPEC+ production quotas in May, according to Reuters estimates.
Meanwhile, the U.S. Department of Energy reported that crude inventories held in the Strategic Petroleum Reserve (SPR) fell by 6.2 million barrels in the week ended 3 July to 319.5 million barrels, the lowest level since April 1983.
The drawdown forms part of a U.S. plan to release 172 million barrels from the reserve to help offset tighter global supplies following the Iran conflict and ease pressure on fuel prices.
Over the weekend, the Organization of the Petroleum Exporting Countries and its allies, including Russia (OPEC+), agreed to raise collective production targets by a further 188,000 barrels per day from August, following similar increases in June and July.
