Oil prices slipped in early trade Tuesday, extending declines from the previous session as investors priced in a potential ceasefire between Israel and Hezbollah, weighing on oil's risk premium.
Brent crude futures lost 28 cents, or 0.38 percent, to $72.73 a barrel by 0106 GMT, while U.S. West Texas Intermediate oil futures were at $68.62 a barrel. , down 32 cents, or 0.46%.
Both benchmarks fell $2 a barrel on Monday following reports that Lebanon and Israel agreed to terms of a deal to end the conflict between Israel and Hezbollah, which triggered a fall in crude oil.
“A ceasefire in Lebanon reduces the likelihood that the new US administration will impose tough sanctions on Iranian crude oil,” ANZ analysts said.
Iran, which supports Hezbollah, is an OPEC member whose production amounts to around 3.2 million barrels per day, or 3% of global production.
If President-elect Donald Trump's administration returns to a maximum pressure campaign on Tehran, Iranian exports could fall by as much as 1 million bpd, analysts say, tightening global crude flows.
In Europe, kyiv, the capital of Ukraine, suffered a sustained Russian drone attack on Tuesday, Mayor Vitali Klitschko said.
Hostilities between Russia, a major oil producer, and Ukraine intensified earlier this month after US President Joe Biden authorized Ukraine to use US-made weapons to strike deep into Russia, which constitutes a significant turnaround in Washington's policy in the conflict between Ukraine and Russia.
Elsewhere, OPEC+ could consider maintaining its current oil production cuts from January 1 at its next meeting on Sunday, Azerbaijani Energy Minister Parviz Shahbazov told Reuters, with the group having already postponed the increases due to concerns about demand.
United States President-elect Donald Trump said he would sign an executive order imposing 25% tariffs on all products entering the United States from Mexico and Canada. It was unclear whether this would include crude oil imports.
The vast majority of Canada's 4 million barrels per day (bpd) of crude exports go to the United States, and analysts have said Trump is unlikely to impose tariffs on Canadian oil, which cannot be easily replaced since it differs from the qualities produced by the United States.
