NEW YORK: Oil prices fell on Tuesday, with an uncertain outlook for global demand knocking value off crude futures contracts despite some risk premium from the Israel-Hamas conflict.

Brent futures fell $1.44 or 1.7% to $82.12 a barrel by 11:27 a.m. EST (1627 GMT). The six-month spread for Brent on Tuesday was also at its highest since October, a sign of a tighter market.

US West Texas Intermediate (WTI) crude for April delivery fell 70 cents, or 0.9%, to $78.49 a barrel, after earlier paring $1. The March WTI contract gained 36 cents or 0.45% to $79.55 a barrel ahead of its expiry during the session.

There was no settlement for WTI on Monday due to a US public holiday.

Crude markets were “marginally lower” in “quiet trading over the Presidents’ Day holiday in the US and as demand concerns offset ongoing Middle Eastern geopolitical tensions,” IG market analyst Tony Sycamore said in a note.

Various countries are increasing efforts to secure a ceasefire between Israel and Hamas in Gaza as the threat of an Israeli assault on the city of Rafah looms. The UN has warned an assault “could lead to a slaughter.”

Shipping has suffered as the conflict in the Middle East threatens to escalate, with energy markets particularly vulnerable. In support of Palestinians, Iran-aligned Houthis have increased attacks on shipping lanes in the Red Sea and Bab al-Mandab Strait, with at least four more vessels hit by drone and missile strikes since Friday.

But the conflict in the Middle East, one of the world’s major oil-producing regions, has not been enough to counter crude investors’ worries about flagging global demand.

China announced its biggest ever reduction in the benchmark mortgage rate on Tuesday, the largest since the reference rate was introduced in 2019 and far more than analysts had expected.