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Brent crude futures rose 27 cents, or 0.3%, to $88.67 a barrel
at 0830 GMT, while U.S. West Texas Intermediate crude futures
gained 30 cents, or 0.4%, to $82.93 a barrel.
The front-month contract of both benchmarks lost more than 1% on
Monday.
"The ongoing negotiation for a potential ceasefire between
Israel and Hamas has led market participants to further unwind
the geopolitical risk premium in oil prices, while the upcoming
Fed meeting also drives some near-term reservations," said Yeap
Jun Rong, market strategist at IG.
"Rates being kept at elevated levels for longer could trigger a
further rise in the U.S. dollar, while also putting some risks
to oil demand outlook."
Hamas negotiators left Cairo late on Monday to consult with the
group's leadership after talks with Qatari and Egyptian
mediators on a response to a phased truce proposal that Israel
presented over the weekend.
The delegation was expected to report back within two days, two
Egyptian security sources said.
"The market will need a deal to be actually clinched in order to
resume a sell-off in crude," Vandana Hari, founder of oil market
analysis provider Vanda Insights, said.
Continued attacks by Yemen's Houthis on maritime traffic south
of the key Suez Canal trading route have kept a floor under oil
prices and could prompt higher risk premiums if players
anticipate crude supply disruptions.
On the economic front, investors are on watch this week for the
U.S. Federal Reserve's May 1 policy review, with stubborn
inflation pushing out market expectations for any rate cuts,
which could bolster the U.S. dollar and hamper oil demand.
Some investors are cautiously pricing a higher probability that
the Fed could hike interest rates by a quarter percentage point
this year and next as inflation and the labor market remain
resilient.
Additionally, concerns over demand have weighed on sentiment,
ANZ analysts said in a research note, as premiums for diesel and
heating oil over crude oil have fallen to their lowest in
months.
(Additional reporting by Georgina McCartney and Emily Chow;
Editing by Sonali Paul and Jan Harvey)
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