By Georgina McCartney
HOUSTON (Reuters) -Oil prices settled lower on Tuesday, extending the previous day's losses in choppy trade after Israel agreed to a ceasefire deal with Hezbollah, reducing oil's risk premium.
Brent crude futures settled down 20 cents, or 0.27%, to $72.81 a barrel. U.S. West Texas Intermediate crude futures settled at $68.77 a barrel, down 17 cents, or 0.25%.
The accord between Israel and armed group Hezbollah was expected to take effect on Wednesday, U.S. President Joe Biden said.
Israeli Prime Minister Benjamin Netanyahu said he was ready to implement a ceasefire and would "respond forcefully to any violation" by Hezbollah.
On Monday, oil prices fell more than $2 following multiple reports that the warring sides had agreed to terms of a ceasefire.
A ceasefire could pressure crude oil prices because the U.S. administration would likely reduce sanctions on oil from Iran, a supporter of Hezbollah, StoneX analyst Alex Hodes said in a note.
OPEC+ EYE OUTPUT HIKE DELAY
Both benchmarks briefly jumped more than $1 per barrel during the session.
"We popped and dropped around the time news came out of the resumption of OPEC talks," said Phil Flynn, senior analyst at Price Futures Group.
OPEC+ nations are discussing a further delay to a planned oil-output hike that was due to start in January, two sources from the producer group said, ahead of Sunday's meeting to decide policy for early 2025.
The group pumps about half the world's oil, and had planned to gradually roll back oil-production cuts with small increases over many months in 2024 and 2025. But a slowdown in Chinese and global demand, and rising output outside the group, have put a dampener on that plan.
"There were embers in the fire this morning with OPEC+ looking to defer production increases again and the Trump tariffs, but those were not enough to move the needle to support prices anywhere above $70 a barrel for WTI," said Again Capital partner John Kilduff.
TRUMP TARIFFS TO INCLUDE CRUDE OIL, SOURCES
U.S. President-elect Donald Trump said he would impose a 25% tariff on all products coming into the U.S. from Mexico and Canada.
Crude oil would not be exempt from the trade penalties, two sources familiar with the plan told Reuters on Tuesday.
Maintaining the flow of energy products across the U.S. borders with Mexico and Canada is critical, the top U.S. oil and gas lobbying group, American Petroleum Institute, said.
The vast majority of Canada's 4 million barrels per day of crude exports go to the U.S. Analysts had said it was unlikely Trump would impose tariffs on Canadian oil, which cannot be easily replaced since it differs from grades that the U.S. produces.
Meanwhile, U.S. crude oil stocks fell while fuel inventories rose last week, market sources said, citing API figures on Tuesday.
Crude stocks fell by 5.94 million barrels in the week ended Nov. 22, the sources said on condition of anonymity. Gasoline inventories rose by 1.81 million barrels and distillate stocks climbed by 2.54 million barrels, they said.