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 17 cents to $110.83 a barrel by 0445 GMT. It plunged as much as $3 in the previous session, but recouped most of those losses to end 5 cents down. US oil rose 28 cents to $94.37.

"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 US Fed will roll back its monetary stimulus.

Latest data from the US showed that contracts to buy previously owned US homes hit a 10-month low in October. The US 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.

US STOCKPILES

Oil, particularly the US benchmark, was supported on expectations distillate stocks, which include heating oil and diesel fuel, dropped 800,000 barrels last week, indicating a pick-up in fuel demand in the world's biggest oil consumer.

The fall is overshadowing a forecast of a rise in crude stocks, by 800,000 barrels for the week ended Nov. 22.

The decline in distillate inventories follows a plunge a week earlier in the stocks of the fuel, by 4.8 million barrels, many times higher than forecast.

Industry group American Petroleum Institute (API) will give out its numbers later in the day, followed by the official U.S. Energy Information Administration (EIA) data on Wednesday.

The drop in Libya's exports to a fraction of its capacity is also supporting oil. Troops struggled to establish control across the country, clashing with militants in the eastern city of Benghazi with at least nine people killed in the fighting.

Brent is expected to keep rising to a resistance of $112.49, a break above which will lead to a further gain to $113.90, while U.S. oil is expected to test a resistance of $95.25, according to Reuters technical analyst Wang Tao.  - Reuters