- Oil prices give up the morning's gains after Brent crude rose to its highest level since early July.
- Recent data shows that output from OPEC is gradually rising but remains below target.
- China's independent refiners ramp up their imports of crude oil by 40 percent in August.
Oil prices fell on Tuesday as some investors took profits on recent strong gains, but losses were limited the day after a U.S.-Mexico trade agreement eased worries about tensions between the two countries.
Brent crude was down 25 cents to $75.96 a barrel by 2:29 p.m. ET, having touched a session peak of $76.97, the highest since July 11. U.S. crude futures ended Tuesday's session down 34 cents at $68.56 a barrel.
Last week Brent marked a 5.6 percent gain, while WTI increased 4.3 percent.
"The market was due for a correction," said Phillip Streible, senior market strategist at RJO Futures.
Market participants awaited industry data on U.S. oil inventories, due at 4:30 p.m. EDT (2030 GMT), that was expected to show a drop in crude stocks last week. Official data is due on Wednesday.
Boosting market sentiment, however, was news that the United States and Mexico agreed on Monday to overhaul the North American Free Trade Agreement (NAFTA).
"It paves the way for the energy industry in both countries to coexist rather freely, and that should be good for demand," Bob Yawger, director of futures at Mizuho in New York, said.
Canada's top trade negotiator joins her Mexican and U.S. counterparts in Washington on Tuesday in a bid to remain part of the trilateral North American trade pact.
Modest output increases from OPEC also supported prices. The monitoring committee of the Organization of the Petroleum Exporting Countries found that producers participating in a supply-reduction agreement, which includes non-OPEC member Russia, cut output in July by 9 percent more than called for.
The findings of the OPEC monitoring committee for last month compare with a compliance level of 120 percent for June and 147 percent for May, meaning participants have been steadily increasing production, but at a more modest pace than some had expected.
Investors are now more confident that supply is likely to fall short of demand in the coming months, as reflected by a narrowing in the discount, or spread, between the October and November Brent futures contracts to around 26 cents a barrel, half of what it was a month ago.
"We were of the view earlier that we are expecting prices to edge a bit lower over the rest of this year, but I struggle to see that. I see the market remaining well supported, with potential shocks to the upside, depending on what we get from Iran," ING commodities strategist Warren Patterson said.
The biggest potential catalyst for higher oil prices are U.S. sanctions on Iran's energy sector that come into force in November and analysts estimate export restrictions could cut supply by anywhere between 650,000 and 1.5 million bpd.
Oil fell towards $70 last week, depressed by concern that the trade dispute between the United States and China could undermine global growth and, more concretely, crude consumption in the world's largest commodities importer.
But China's independent refiners ramped up their imports of crude oil by 40 percent in August relative to July after returning from prolonged summer maintenance, according to Reuters data.
Industrial action on French oil major Total's North Sea oil platforms on Sept. 3 will be suspended, the Unite trade union said.