Oil prices ticked up in early trade on Tuesday after falling in the previous session as investors took stock of a potential ceasefire between Israel and Hezbollah, weighing on oil’s risk premium.
Brent crude futures rose 29 cents, or 0.4%, to $73.2 a barrel as at 0430 GMT, while U.S. West Texas Intermediate crude futures were at $69.2 a barrel, up 26 cents, or 0.38%.
Both benchmarks settled down $2 a barrel on Monday following reports that Lebanon and Israel had agreed to the terms of a deal to end the Israel-Hezbollah conflict, which triggered a crude oil selloff.
Market reaction to the ceasefire news was “over the top”, said senior market analyst Priyanka Sachdeva at Phillip Nova.
While the news calmed fear of disruption to Middle Eastern supply, the Israel-Hamas conflict “never actually disrupted supplies significantly to induce war premiums” this year, Sachdeva said.
“The vulnerability of oil prices to geopolitical headlines lacks foundational backup and, coupled with the inability to maintain recent gains, reflects weakening global demand for oil and suggests a volatile market ahead.”
