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Oil prices rose after hopes diminished that negotiations between Israel and Hamas would lead to a ceasefire in Gaza amid concerns the lingering conflict could potentially disrupt supply from the key Middle East producing region.
Brent crude futures rose 14 cents to $90.52 a barrel by 0610 GMT. US West Texas Intermediate (WTI) crude was 10 cents higher at $86.53.
A fresh round of Israel-Hamas ceasefire discussions in Cairo had ended a multi-session rally on Monday, leading Brent to its first decline in five sessions and WTI to its first in seven on the prospect that geopolitical risks could ease.
But Israeli Prime Minister Benjamin Netanyahu said on Monday an unspecified date had been set for Israel's invasion of the Rafah enclave in Gaza.
That is "ending the hopes that briefly gripped the market yesterday that geopolitical tensions in the region might be easing," Tony Sycamore, a market analyst with IG, wrote in a note.
Hamas said early on Tuesday that Israel's proposal it received from Qatari and Egyptian mediators did not meet any of the demands of Palestinian factions. But Hamas said it would study the proposal before responding to the mediators.
Without an end to the conflict, there is an elevated risk that it involves other countries in the region, especially Iran, a major Hamas backer and the third-largest producer in the Organisation of the Petroleum Exporting Countries (Opec).
An Iranian response to Israel's suspected attack last week on its consulate in Syria "could drag the oil market into the conflict, after being largely unimpacted since Hamas’s attack on Israel," ANZ analysts said in a client note.
Tehran said that it would take revenge after an airstrike killed two of its generals and five military advisors in Damascus, although Israel has not claimed responsibility for the attack.
"The positive geopolitical risk premium is indeed supporting the current medium-term uptrend phase of oil," said Kelvin Wong, a senior market analyst at OANDA in Singapore.
Broader fundamentals are supportive of prices as well, the ANZ analysts said. India's fuel demand hit a record high in the 2024 fiscal year driven by higher gasoline and jet fuel consumption, data showed on Monday. An improvement in Chinese manufacturing activity announced last week is also expected to boost fuel demand.
This week, the market will be watching inflation data due from the US and China for further signals on the economic direction of the world's top two oil consumers.
In the Americas, Mexico's state oil company Pemex said it would reduce crude exports by 330,000 barrels per day so it can supply more to domestic refineries, cutting the supply available to the company's US, European and Asian buyers by one-third. -Reuters