Investing.com-- Oil prices moved little in early Asian trade on Monday, steadying after strong gains last week as traders digested reports that Israel was close to a ceasefire with Lebanon militant group Hezbollah.
While the prospect of a less severe Middle East conflict does portend a smaller risk premium for oil, prices remained near recent two-week highs amid heightened tensions between Russia and Ukraine.
Brent oil futures expiring in January fell slightly to $75.14 a barrel, while West Texas Intermediate crude futures inched lower to $70.75 a barrel by 19:47 ET (00:47 GMT).
Israel close to ceasefire with Hezbollah- Axios
Israel and Hezbollah were close to signing a ceasefire agreement to end hostilities in Lebanon, Axios reported on Sunday, citing Israeli and U.S. officials. Israel daily The Times of Israel also reported that Prime Minister Benjamin Netanyahu was holding high-levels talks over the deal, which was brokered by U.S. officials.
Israeli officials are considering a draft agreement that includes a 60-day transition period where the Israeli military will withdraw from southern Lebanon and Hezbollah will move its heavy weapons north of the Litani River.
The agreement will also see the establishment of a U.S.-led oversight committee.
The prospect of an Israel-Hezbollah ceasefire points to lessened tensions in the Middle East, presenting a lower risk premium for oil. Traders were concerned that any escalation in tensions would disrupt supplies from the oil-rich region.
Still, reports of the ceasefire were undermined by Hezbollah launching more rockets around Tel Aviv, which came after Israel launched a large strike on Beirut over the weekend.
Tensions in the Middle East were also heightened by Iran stating that it will increase its nuclear fuel-making capacity.
Oil at over two-week high amid Russia-Ukraine tensions
Oil prices remained close to their highest levels in over two weeks, having risen sharply in recent sessions on heightened tensions between Russia and Ukraine.
Ukraine began using Western-made, long-range missiles to hit targets deeper within Russia- a move that drew ire from Moscow.
Moscow responded by lowering its threshold for nuclear retaliation, while also striking Ukraine with an experimental hypersonic missile.
“The recent exchanges indicate the war has entered a new and dangerous phase, raising concerns of disruptions to supplies,” ANZ analysts wrote in a note.