US oil settles up 45 cents, or 0.8%, at $59.97 a barrel

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U.S. crude prices edged up on Tuesday as a tropical storm approached the oil-producing state of Texas, but global oversupply curbed gains and kept Brent futures little changed.

U.S. July crude, also known as West Texas Intermediate (WTI), closed up 45 cents, or 0.8 percent, at $59.97 a barrel. Bren front-month August crude fell 20 cents to $63.70 per barrel, off its $64.41 intraday peak and near its 50-day moving average of $64.01.

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Tropical Storm Bill churned off the Texas coast in the Gulf of Mexico and is expected to bring heavy rains and strong winds to the coast and central part of the state.

Output from offshore platforms, which pump about a fifth of U.S. crude oil production, has not been affected, and the focus is shifting to the potential effect on refineries. More than 45 percent of U.S. refining capacity is located along the Gulf Coast.

Crude vs. energy stocks

"Any reduction in crude oil processing as a result of the tropical storm should really lead to lower oil prices because it means that crude oil stocks increase," Commerzbank analyst Carsten Fritsch said.

"On the other hand, it would drive up the prices of oil products as the lower production would result in destocking."

U.S. RBOB gasoline rose 1.84 cents to $2.1175 a gallon, bolstered by last week's government inventory data showing the bulk of the 2.9-million-barrel drop in the week to June 5 occurred on the East Coast.

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Helping U.S. crude outperform Brent is the expectation that this week's U.S. inventory data will show another draw.

U.S. crude stocks are forecast to have fallen 1.8 million barrels last week, according to a Reuters poll of analysts.

That would be a seventh consecutive draw recorded by the government, with the next Energy Information Administration report due on Wednesday.

Unsold North Sea and West African crude barrels building up in tankers offshore in the Atlantic Basin are weighing on physical prices. Supply is increasing even as European refiners run hard to take advantage of strong margins.

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"The amount of crude oil afloat on the water off the coast of the UK is increasing, and that is putting considerable pressure on the North Sea price structure," Petromatrix oil analyst Olivier Jakob said in a note.

"The last time we had a North Sea structure as weak was in July of last year, a move that preceded the big flat price dump," he warned.