Oil prices fell by about 0.5%, helped by hopes for a diplomatic resolution to the conflict in the Middle East, as well as the strengthening of the US currency. However, trading remained muted with many Asian markets closed for Lunar New Year holidays.
Israel said it had "completed" a series of strikes on southern Gaza, which slightly eased concerns about oil supplies from the Middle East. In addition, Iran's foreign minister flagged the Israel-Hamas conflict could be moving closer to a diplomatic solution.
Oil has been trading in the $10 range for most of this year as nervousness about the conflict in the Middle East has been partially offset by abundant global supply and shaky demand prospects, especially in China, the second largest consumer.
But last week, oil prices jumped by about 6% amid geopolitical risks, including concerns about the expansion of the Israeli-Palestinian conflict throughout the region and concerns about potential oil supply disruption in the Middle East.
While supply concerns remained relatively elevated, news from the U.S. eased some concerns. U.S. energy companies have increased the number of drilling rigs for oil and natural gas production to the highest level since mid-December, potentially signaling an increase in production. Last week, oil production in the country returned to a record 13.3 million barrels per day.
This week traders will be monitoring the monthly reports from OPEC and the International Energy Agency for further guidance on supply and demand.