Oil prices closed higher on Tuesday as investors assessed concerns over a supply glut against uncertainties surrounding the latest U.S. sanctions on Russian oil.

The benchmark West Texas Intermediate (WTI) crude for December delivery rose $0.91, or 1.51%, to settle at $61.04 per barrel on the New York Mercantile Exchange. Brent crude futures gained $1.10, or 1.72%, closing at $65.16 per barrel.

Market participants continued evaluating the repercussions of U.S. sanctions on Russia and their impact on crude and refined fuel markets. Sources indicated Monday that Lukoil declared force majeure at an Iraqi oilfield it operates, marking the most significant sanction-related disruption so far.

PVM analyst Tamas Varga noted that despite crude oversupply concerns, restricted fuel exports due to sanctions are supporting oil prices. "New U.S. sanctions targeting Russia's major oil producers and exporters are constraining refined product shipments. Consequently, heating oil/diesel and RBOB gasoline prices are diverging from crude," he explained.

European diesel refining margins hovered near a 21-month high of about $31 per barrel, while gasoline cracks held at an 18-month peak of nearly $21 per barrel.

However, worries about excess crude supplies capped price gains. "With OPEC's continued output increases, global oil balances are painting an increasingly bearish supply-side picture, while demand from major consumers keeps softening amid slowing economic growth," analysts at Ritterbusch and Associates stated in a report.

Earlier this month, OPEC+ agreed to raise December production targets by 137,000 barrels per day but also committed to pausing further increases in Q1 2025.

Meanwhile, broader markets found support as the U.S. Senate approved a compromise bill to restore federal funding, potentially ending the longest government shutdown this week.