Shafaq News/ Oil prices ticked up in early trade on Tuesday afterfalling in the previous session as investors took stock of a potentialceasefire 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 0430GMT, 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 reportsthat Lebanon and Israel had agreed to the terms of a deal to end theIsrael-Hezbollah conflict, which triggered a crude oil selloff.
Market reaction to the ceasefire news was "over the top", saidsenior market analyst Priyanka Sachdeva at Phillip Nova.
While the news calmed fear of disruption to Middle Eastern supply, theIsrael-Hamas conflict "never actually disrupted supplies significantly toinduce war premiums" this year, Sachdeva said.
"The vulnerability of oil prices to geopolitical headlines lacksfoundational backup and, coupled with the inability to maintain recent gains,reflects weakening global demand for oil and suggests a volatile marketahead."
Iran, which supports Hezbollah, is an OPEC member with production ofaround 3.2 million barrels per day, or 3% of global output.
A ceasefire in Lebanon would reduce the likelihood that the incomingU.S. administration will impose stringent sanctions on Iranian crude oil, saidANZ analysts.
If President-elect Donald Trump's administration returned to amaximum-pressure campaign on Tehran, Iranian exports could shrink by 1 millionbpd, analysts have said, tightening global crude flows.
In Europe, Ukraine's capital Kyiv was under a sustained Russian droneattack on Tuesday, Mayor Vitali Klitschko said.
Hostilities between major oil producer Russia and Ukraine intensifiedthis month after U.S. President Joe Biden allowed Ukraine to use U.S.-madeweapons to strike deep into Russia in a significant reversal of Washington'spolicy in the Ukraine-Russia conflict.
Elsewhere, OPEC+ may consider leaving its current oil output cuts inplace from Jan. 1 at its next meeting on Sunday, Azerbaijan's Energy MinisterParviz Shahbazov told Reuters, as the producer group had already postponedhikes amid demand worries.
On Monday, Trump said he would sign an executive order imposing a 25%tariff on all products coming into the U.S. from Mexico and Canada. It wasunclear whether this would include crude oil.
The vast majority of Canada's 4 million bpd of crude exports go to theU.S. Analysts have said it is unlikely Trump would impose tariffs on Canadianoil, which cannot be easily replaced since it differs from grades that the U.S.produces.
"Trump's policies are just a blueprint for now... What actuallyhappens on that front is still uncertain," said Phillip Nova's Sachdeva.
For the time being, markets are eyeing Trump's plan to increase U.S. oilproduction, which has been near record levels throughout 2022 to 2024 andabsorbed supply disruption from geopolitical crises and sanctions, Sachdevasaid.
(Reuters)