By Barani Krishnan
NEW YORK (Reuters) - Oil prices bounced from three-week lows on Tuesday, with U.S. refined fuel trading leading the rally on bets for strong summer demand, even as Greece's move toward a debt default threatened to jolt global markets.
The run-up in oil also jarred with the stronger dollar, which normally tends to weigh on commodities, and the extension of a deadline for a nuclear deal that would allow Iran to export more crude into an oversupplied market.
While crude futures were up on the day, they were down for June. Brent crude was headed its second straight monthly loss but a 10 percent gain for the first half of the year. U.S. crude futures were also down for the month but posted a first-half gain.
Crude had a sterling quarter, nevertheless, with Brent notching its largest gain since September 2012 and U.S. crude its strongest since December 2011.
Front-month U.S. gasoline and ultra-low sulfur diesel futures that expire on Tuesday rallied about 2 percent, helping lift crude futures as traders and investors squared positions ahead of the month- and quarter-end.
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Donald Morton, who runs an energy-trading desk in Haverhill, Massachusetts, for investment bank Herbert J. Sims & Co, said the market was benefiting from the crack spread, the difference between the price of crude and the petroleum products extracted from it.
The gasoline crack widened sharply for the first time in three days, while that for ULSD hit a high set on June 19.
Brent was up $1.29, or 2 percent, at $63.30 a barrel by 12:38 p.m. EDT (1638 GMT). It fell 4 percent for the month, rose 14 percent for the quarter and was up 10 percent year-to-date.
U.S. crude rose by 80 cents, or 1.3 percent, to $59.12. It slipped 2 percent for the month, rose 24 percent for the quarter and 10 percent for the year.
Greek government sources have said the country will default on a crucial repayment due to the International Monetary Fund later on Tuesday, plunging it deeper into financial crisis. The dollar rallied against the euro in anticipation of the default.
In Vienna, Iran and six world powers extended to July 7 talks for an accord on Tehran's nuclear program that will allow unrestricted crude exports from Iran. U.S. President Barack Obama said a deal was only possible if Iran ensured it will not make a nuclear weapon.
(Additional reporting by Christopher Johnson in London and Aaron Sheldrick in Tokyo; Editing by Lisa Von Ahn)