Oil prices inched up on Tuesday following an Israeli strike in Rafah, Gaza, amidst ongoing ceasefire negotiations with Hamas that have yet to reach a resolution.
Brent crude futures rose by 9 cents, or 0.11%, reaching $83.42 per barrel at 0635 GMT, while U.S. West Texas Intermediate (WTI) crude futures climbed 7 cents, or 0.09%, to $78.55 a barrel. "Oil prices opened higher this morning, with some complications in the ceasefire talks between Israel and Hamas leading market participants to brace for geopolitical tensions that could persist," said Yeap Jun Rong, a market strategist at IG.
Market participants are eagerly awaiting upcoming U.S. crude inventories data releases, Yeap added. A preliminary Reuters poll on Monday showed that U.S. crude oil and product stockpiles were expected to have declined last week. Analysts forecast that crude inventories could have fallen by an average of about 1.2 million barrels in the week leading up to May 3.
During the session, gains in oil futures were limited by a stronger dollar, which makes crude more expensive for traders holding other currencies. The dollar index, which measures the greenback against six major peers, was last up at 105.25.
Oil prices had settled higher on Monday, partially reversing last week's declines. Both contracts had recorded the steepest weekly losses in three months as the market focused on weak U.S. jobs data and the possible timing of a Federal Reserve interest rate cut.
On Monday, the Palestinian militant group Hamas agreed to a Gaza ceasefire proposal from mediators. However, Israel stated that the terms did not meet its demands and continued strikes in Rafah while planning to continue negotiations on a deal.
Israeli forces conducted air and ground strikes in Rafah, located on Gaza's southern edge, and instructed residents to evacuate certain areas of the city, which has been a sanctuary for over 1 million displaced Palestinians.
The absence of a resolution between the parties in the ongoing seven-month-long conflict has bolstered oil prices, as investors fear that regional escalation of the conflict will disrupt crude supplies from the Middle East.
Saudi Arabia's decision to raise the official selling prices for its crude sold to Asia, Northwest Europe, and the Mediterranean in June has also supported prices. This move signals expectations of strong demand this summer.
The world's top exporter increased its flagship Arab Light crude oil price to Asia to $2.90 a barrel above the Oman/Dubai average in June, the highest since January and at the upper end of traders' expectations in a Reuters survey.