Oil prices steadied on Tuesday as weakness in the physical market and concerns about sticky U.S. inflation countered fears of escalation in the Middle East. Brent crude futures were down 0.4% at $83.03 a barrel, while U.S. West Texas Intermediate (WTI) crude futures fell 0.3% to $78.23.
The Israeli military seized control of the Rafah border crossing between the Gaza Strip and Egypt, and its tanks pushed into the southern Gazan town of Rafah, as mediators struggled to secure a ceasefire agreement. However, the lack of optimism in the market was more the result of genuine weakness in the physical markets.
Tamas Varga of oil broker PVM said the truce remains elusive, and even if it is reached, the question remains whether Houthi hostilities in the Red Sea would cease and the Suez Canal would reopen, significantly mitigating the risk of shipping throughout the region.
The first-month Brent contract’s premium to the six-month contract slipped to $2.85 a barrel, the lowest since mid-February, indicating a well-supplied market and leaving the upside capped for now.
Last week, Brent and WTI had registered their 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. Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said that inflation moving sideways shows monetary policy may not be as tight as some officials think.
The latest U.S. inventory reports will also be in focus, as crude oil and product stockpiles were expected to have fallen last week, according to a Reuters poll.