Oil prices held steady on Tuesday after falling 2% in the previous session, with investors monitoring peace talks to end Russia's war in Ukraine, concerns about abundant supplies, and the upcoming US interest rate decision.

Brent crude futures rose 22 cents, or 0.4%, to $62.71 a barrel at 11:45 GMT. U.S. West Texas Intermediate crude rose 20 cents, or 0.3%, to $59.08 a barrel. Both contracts fell more than $1 a barrel on Monday after Iraq restored production at Lukoil's West Qurna 2 oil field, one of the world's largest.

Ukraine will share a revised peace plan with the US following talks in London between President Volodymyr Zelenskiy and the leaders of France, Germany, and the UK. "Oil prices are in a tight trading range until we get a better idea of ​​the direction of these peace talks," said Tim Waterer, chief market analyst at KCM Trade.

"If the talks fail, we expect oil prices to rise, or if there is progress, and there is a possibility of Russian supply to the global energy market being restored, prices are expected to fall," he added.

According to sources familiar with the matter, the G7 and the European Union are in talks to replace price caps on Russian oil exports with a complete ban on maritime services in an effort to reduce Russian oil revenues. Some analysts are watching for clues about supply in the next International Energy Agency report.

FOCUS SHIFTS TO IEA REPORT, FED DECISION

"The next (market) driver is likely to be the IEA's monthly oil market report for December, released on December 11, which has predicted a record surplus in the oil market by 2026, as highlighted in its previous outlook report," said Kelvin Wong, senior market analyst at OANDA.

If the IEA continues to flag the risk of a surplus in the oil market in its December report, WTI crude could weaken and test the support zone in the range of $56.80 to $57.50 per barrel, he added. "(Brent) is being pushed towards the $60 level by the surge in oil at sea," said SEB chief commodity analyst Bjarne Schieldrop. "The only reason Brent crude hasn't fallen faster and deeper is because of the US sanctions on Rosneft and Lukoil."

Also in the spotlight is the Federal Reserve's policy decision due on Wednesday, with the market pricing in an 87% probability of a quarter-point interest rate cut. Lower interest rates are typically a positive driver for oil demand given the lower borrowing costs, although some analysts are cautious about how much impact this will have on oil prices at this time.

"While the market is largely invested in the upcoming Fed policy decision on Wednesday for a possible 25bps cut, something that could provide near-term support in the lower $60-$65 range, the broader price structure remains supported by expectations of oversupply in 2026 (oil markets)," said Priyanka Sachdeva, senior market analyst at Phillip Nova. (alg)

Source: Reuters.com