LONDON: Oil edged up on Tuesday a day after falling as Israel-Hamas talks offered hopes of a ceasefire even as Red Sea attacks continued, while investors awaited signals on U.S. interest rates ahead of a meeting on Wednesday.
Brent crude futures for June, which expire on Tuesday, were up 26 cents, or 0.3%, to $88.67 a barrel at 1101 GMT. The more active July contract rose 38 cents, or 0.4%, to $87.58 per barrel.
U.S. West Texas Intermediate crude futures were up 34 cents, or 0.4%, to $82.97 a barrel. The front-month contract of both benchmarks lost more than 1% on Monday.
“New hopes of a ceasefire between Israel and Hamas caused oil prices to fall at the start of the week,” said Commerzbank analyst Carsten Fritsch, adding that prices were also pressured by lower crude demand from refineries leading to higher inventory levels.
Hamas negotiators left Cairo late on Monday to consult with the group’s leadership after talks with Qatari and Egyptian mediators on a response to a phased truce proposal that Israel presented over the weekend.
Oil down on Israel-Hamas peace talks
The delegation was expected to report back within two days, two Egyptian security sources said.
Continued attacks by Yemen’s Houthis on maritime traffic south of the Suez Canal - an important trading route – have provided a floor for oil prices and could prompt higher risk premiums if players anticipate crude supply disruptions.
“The upcoming Fed meeting also drives some near-term reservations,” said Yeap Jun Rong, market strategist at IG. “Rates being kept at elevated levels for longer could trigger a further rise in the U.S. dollar, while also putting some risks to oil demand outlook.”
Investors are on watch this week for the U.S. Federal Reserve’s May 1 policy review, with stubborn inflation pushing out market expectations for any rate cuts, which could bolster the U.S. dollar and hamper oil demand.
Some investors are cautiously pricing a higher probability that the Fed could hike interest rates by a quarter percentage point this year and next as inflation and the labour market remain resilient.
Additionally, concerns over demand have weighed on sentiment, ANZ analysts said in a research note, as premiums for diesel and heating oil over crude oil have fallen to their lowest in months.
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