By Nicole Jao
NEW YORK Oil prices edged higher on Tuesday ahead of a trip by U.S. President Joe Biden to the Middle East that is likely to involve balancing support for Israel with trying to prevent any regional escalation of its war with Hamas.
Following a drop of more than a dollar on Monday, Brent futures rose $0.74 to $90.39 a barrel at 10:40 a.m (1440 GMT). U.S. West Texas Intermediate (WTI) crude rose $0.69 to $87.35.
Fears the Middle East conflict could widen drove big gains in both oil benchmarks last week. Global benchmark Brent gained 7.5% in its largest weekly gain since February.
Biden's visit to Israel on Wednesday will seek to balance showing support for Israel's war on Hamas and trying to rally Arab states to help prevent a regional conflict, after OPEC-member Iran pledged "pre-emptive action" from the "resistance front" of its allies that include the Hezbollah movement in Lebanon.
"Oil prices are wavering as energy traders await to see if the U.S. diplomatic efforts will be successful in preventing the Israel-Hamas conflict from turning into a wider regional war," said Edward Moya, senior market analyst at OANDA.
"The crude demand outlook also got a small boost after the latest round of U.S. economic data showed that the consumer is still healthy and that industrial production is tentatively picking up," he said.
Elsewhere, Venezuela's government and opposition are set to resume long-suspended talks on Tuesday, which could lead to Washington easing sanctions, multiple sources said.
Since 2019, the U.S. has imposed sanctions on oil exports from Venezuela, a member of the Organization of Petroleum Exporting Countries (OPEC), to punish President Nicolas Maduro's government following elections in 2018 that Washington considered a sham.
The U.S. government has been seeking ways to increase the flow of oil to world markets to alleviate high prices. But any real oil output increase by Venezuela will take time because of a lack of investment.
"The market is really tight right now and that's why we're so nervous," Phil Flynn, an analyst at Price Futures Group, said.
The CEO of Saudi Arabia's Saudi Aramco said on Tuesday the company could ramp up oil production within weeks if needed, as global consumption is set to reach a record level by year-end.
OPEC+, which comprises OPEC countries and leading allies including Russia, has cut output since last year in what it says is pre-emptive action to maintain market stability.
Looking ahead, the oil market is waiting for U.S. oil inventory data from the American Petroleum Institute (API), an industry group, on Tuesday and the government's Energy Information Administration (EIA) on Wednesday.
(Reporting by Nicole Jao in New York; Additional reporting by Paul Carsten in London and Sudarshan Varadhan in Singapore; Editing by Kim Coghill, Ed Osmond, Jan Harvey and Barbara Lewis)