By Sonali Paul and Koustav Samanta
MELBOURNE/SINGAPORE - Oil prices slipped on Tuesday as traders took profits after sharp gains in the previous session and Libya's state oil company flagged progress on talks to resume exports, potentially boosting supply.
The more-active Brent crude futures for September fell 24 cents, or 0.6%, to $41.61 a barrel by 0610 GMT, paring Monday's 92 cent gain. The August contract, which expires on Tuesday, fell 24 cents to $41.47.
U.S. crude was down 33 cents, or 0.8% at $39.37 a barrel.
"Both (benchmark crude) contracts have retreated modestly today, driven by profit-taking flows after the robust New York session," said Jeffrey Halley, senior market analyst at OANDA.
"Although the ranges overnight were impressive, it is essential to note that oil markets are range trading and not trending."
Coronavirus cases continue to rise in southern and southwestern U.S. states, but strong growth in U.S. pending home sales bolstered some optimism that global fuel demand is rising.
"It's really difficult to say that demand is a one-way street. There are still plenty of risks going both ways," said Vivek Dhar, mining and energy commodities analyst at Commonwealth Bank of Australia.
Bulls will be looking for more signs of a demand recovery in data due on Tuesday from the American Petroleum Institute industry group, and from the U.S. government on Wednesday.
A preliminary Reuters poll showed analysts expect U.S. crude oil stockpiles fell from record highs last week and gasoline inventories decreased for a third straight week.
On the supply side, investors are watching to see whether Libya, which can produce about 1% of global oil supply, is able to resume exports, blockaded since January amid a civil war.
Libya's National Oil Corp (NOC) said on Monday it was making progress on talks with neighbouring countries to lift the blockade.
Weak Japanese industrial production data also weighed on market sentiment, reinforcing the prospect of a bumpy recovery in fuel demand.
But stronger-than-expected Chinese factory data, and a drop in Iraq's June oil exports helped cap bigger losses.
(Reporting by Sonali Paul in Melbourne and Koustav Samanta in Singapore; Editing by Kenneth Maxwell and Richard Pullin)