Oil edged higher after swinging between gains and losses for much of the session as traders weighed mixed signals about the risks to flows from the Middle East against the prospect of an impending supply glut.

West Texas Intermediate added 0.5% to settle above $68 a barrel, while Brent settled around $72. WTI had gained as much as 1.1% and slid as much as 1.7% during the session.

Crude fell earlier in the day on unconfirmed reports that Iran may hold off on retaliating against Israel, said Dan Ghali, a commodity strategist at TD Securities. Prices rebounded later after Israel said some projectiles had been launched from Lebanon.

Still, crude is down more than 20% from its highs of the year on expectations that weak demand in China and rising production from outside of the OPEC+ alliance — as well as the group's plan to return some output to the market — will combine to create a surplus of oil next year. More recently, oil prices have remained rangebound, trading in a band of a little more than $6 for almost a month and relegating some risk-hungry investors to the sidelines.

Meanwhile, the US dollar climbed for the fourth straight session, making commodities traded in the currency less appealing. 

OPEC shaved its demand-growth forecasts for a fourth consecutive month on Tuesday, while outlooks from the US and the International Energy Agency are still to come this week.

Even as prices remain stuck for now, Morgan Stanley cut its oil price forecast, citing the likelihood of a "sizeable surplus" next year. The bank reduced its expectations for consumption this year and next and said that while the second Trump presidency could affect prices considerably, it would be hard to call the direction for a while. 

WTI for December delivery climbed 0.5% to settle at $68.43 a barrel. Brent for January settlement rose 0.5% to settle at $72.28 a barrel.

Source : Bloomberg