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Brent crude futures fell 24 cents, or 0.26%, to $91.92 a barrel,
as of 0837 GMT. U.S. West Texas Intermediate crude futures were
down 36 cents, or 0.41%, at $87.72 a barrel.
Both benchmarks traded over $1 a barrel lower than their
previous settlement price at their nadir in Monday's session.
The contracts rose by more than 1% last week for a second
consecutive week, on fears of potential supply disruption if the
Israel-Hamas war grows into a wider conflict in the Middle East,
the world's biggest oil-supplying region.
"Escalating wrath in the region will strengthen economic
headwinds, potentially rising oil prices will push global
inflation higher, monetary tightening could resume, and global
oil demand growth will be dented," said PVM analyst Tamas Varga.
Israel continued its bombardment of Gaza on Monday after
launching air strikes over southern Lebanon overnight.
But aid convoys started to arrive in the Gaza Strip from Egypt
over the weekend, as Arab leaders and foreign ministers gathered
for a summit in Cairo which was unable to yield a joint
statement.
"There is some relief in the oil market that Israel is holding
off on a planned ground incursion of northern Gaza to negotiate
a release of hostages, which opens up a window for diplomacy,"
said Vandana Hari, founder of oil market analysis provider Vanda
Insights.
U.S. President Joe Biden, who visited Israel last week, had
calls on Sunday with the leaders of Canada, France, Britain,
Germany and Italy, after speaking with Israeli Prime Minister
Benjamin Netanyahu and Pope Francis.
Leaders of France and the Netherlands will visit Israel this
week.
The risk of reduced oil supply in the event of escalation in the
Middle East could have been calmed by the U.S. move last week to
suspend sanctions on OPEC member Venezuela, after a Venezuelan
government deal with the opposition.
Meanwhile, Norway's crude production fell to 1.64 million
barrels per day (bpd) in September, down from 1.79 million bpd
in August and below forecasts of 1.73 million bpd.
(Reporting by Robert Harvey in London, Mohi Narayan in New
Delhi, Katya Golubkova in Tokyo and Naveen Thukral in Singapore;
Editing by Emelia Sithole-Matarise)
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