Oil prices eased in early trading on Tuesday following talks in Cairo aimed at achieving a ceasefire between Israel and Hamas, easing concerns about an escalation of conflict in the Middle East. Meanwhile, apprehensions regarding the future of U.S. interest rates weighed on the market.
Brent crude futures slipped by 5 cents, or 0.06%, to $88.35 per barrel at 0006 GMT, while U.S. West Texas Intermediate crude futures declined by 12 cents, or 0.15%, to $82.51 per barrel.
Both benchmarks saw a decrease of over 1% in their front-month contracts on Monday.
Hamas negotiators departed from Cairo late on Monday to discuss a phased truce proposal presented by Israel over the weekend with the group’s leadership, according to Qatari and Egyptian mediators. The delegation is expected to provide an update within two days, as reported by two Egyptian security sources.
Meanwhile, Israeli airstrikes on Monday resulted in the deaths of numerous Palestinians, with a significant portion of the casualties occurring in the southern Gaza city of Rafah, an area foreign leaders have urged Israel to refrain from invading.
Ongoing attacks by Yemen’s Houthis on maritime traffic in the vicinity of the crucial Suez Canal trading route have helped support oil prices, potentially leading to increased risk premiums if crude supply disruptions are anticipated.
According to the military spokesman for the Iran-aligned group, Yahya Sarea, Houthis targeted two U.S. destroyers, the vessel Cyclades in the Red Sea, and the MSC Orion in the Indian Ocean in separate incidents on Tuesday.
In terms of economic indicators, investors are closely monitoring the U.S. Federal Reserve’s policy review scheduled for May 1, particularly in light of persistent inflationary pressures. Market expectations for interest rate cuts have been pushed back, which could bolster the U.S. dollar and dampen oil demand. Some investors are cautiously factoring in a higher likelihood of the Fed implementing a quarter-percentage-point interest rate hike this year and next, given the resilience of inflation and the labor market.
