Crude oil prices drift up with focus on tensions in West Asian region

Oil prices edged up on Tuesday as uncertainty over fighting in the Middle East kept markets on edge, but gains were capped by concerns that central banks will keep interest rates higher for longer to battle inflation, weighing on energy demand.

Brent futures rose 30 cents to $82.30 a barrel as of 0924 GMT. U.S. West Texas Intermediate (WTI) crude gained 31 cents to $77.23 a barrel.

Oil prices were near flat in Monday's trade, after gaining 6% last week.

The conflict in the Middle East has kept prices elevated, as the U.S. and Jordan maintained pressure for a Gaza Strip ceasefire. Senior mediators were to resume work on Tuesday on an Israel-Hamas truce agreement, with the threat of an Israeli ground offensive looming in Rafah.

"Oil prices have been numbed into submission by what has transpired, or not, in the Middle East," said John Evans of oil broker PVM in a note on Tuesday.

One "untoward act, missile or sudden peace agreement and crude prices will move $10/barrel."

Yemen's Iran-aligned Houthis have kept up their attacks in the Red Sea, claiming solidarity with Palestinians and striking vessels with commercial ties to the U.S., Britain and Israel since mid-November.

But changing expectations over the path of U.S. interest rates have limited price gains, with recent central banker comments dashing market hopes for rate cuts early this year.

The New York Fed said its January Survey of Consumer Expectations showed the outlook for inflation a year and five years from now remained above the Fed's 2% target rate.

If inflation worries delay Fed interest rate cuts, that could dampen economic growth and hit oil demand.

U.S. inflation data is expected on Tuesday, while British inflation and euro zone Gross Domestic Product data should land on Wednesday.

U.S. crude inventory data is also due later on Tuesday, with analysts estimating they rose an average of about 2.6 million barrels in the week to Feb. 9.

The Organization of the Petroleum Exporting Countries (OPEC) is scheduled to release its monthly oil market report on Tuesday, but the group's next major decision will come in March, when it and its allies including Russia, known as OPEC+, will decide whether to extend voluntary oil production cuts.

"Our balance sheet suggests that the market will be in surplus in the second quarter of 2024 if the group fails to roll over part of these cuts," ING analysts said in a Tuesday note.