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Brent crude futures dipped 8 cents to $77.91 a barrel by 0914
GMT, while U.S. West Texas Intermediate crude futures fell 13
cents to $72.65. Both contracts gained nearly 1% on Monday,
rising for the first time in four sessions.
"The signs of de-escalation in the Middle-Eastern crisis are
missing and continue to extend some support to ailing oil
prices," said Phillip Nova senior market analyst Priyanka
Sachdeva.
Blinken met Saudi Arabia's de-facto ruler on Monday.
Palestinians hope the visit will clinch a truce before a
threatened Israeli assault on Rafah, a border city where about
half the Gaza Strip population is sheltering.
The ceasefire offer, delivered to Hamas last week by Qatari and
Egyptian mediators, awaits a reply from militants who say they
want more guarantees it will end the four-month-old war.
The United States continued its campaign against Iran-backed
Houthis in Yemen, whose attacks on shipping vessels have
disrupted global oil trading routes.
However, demand outlook concerns limited price gains.
Analysts said expectations of "higher for longer" interest rates
in the U.S. and elsewhere could cap consumption, along with
indications China's economy continues to struggle.
CMC Markets analyst Leon Li also said it would be "difficult to
return to previous highs" given that the run of strong economic
indicators from the U.S. would likely lose steam.
"Layoffs are still increasing. This means that in the long term,
the (oil) demand will decline," Li said.
On the supply side, market participants are awaiting industry
data due later on Tuesday on U.S. crude stockpiles. Five
analysts polled by Reuters estimated on average that crude
inventories rose by about 2.1 million barrels in the week to
Feb. 2.
BMI analysts said in a note they expect the market will remain
broadly balanced over the course of the year and oil prices
would rise a moderate 3.4%.
"However, we see risks to the outlook both to the upside and the
down, due to considerable uncertainties surrounding the strength
of the global economy, the fallout from the unfolding Red Sea
crisis and the evolution of OPEC+ policy, amongst other things,"
they added.
(Reporting by Paul Carsten in London and Stephanie Kelly and
Trixie Yap; Editing by Miral Fahmy, Kim Coghill and Louise
Heavens)
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