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(Bloomberg) — Oil slipped as the US pushed to broker a peace deal between Israel and Hamas that would reduce geopolitical tensions in the Middle East. 

Brent crude traded below $89 a barrel after gaining 2.5% last week, while West Texas Intermediate dropped toward $83. US Secretary of State Antony Blinken will step up efforts to secure a truce in Gaza during a visit to the region. The White House said Israel has agreed to hear out its concerns and hold off invading Rafah until meeting with the Americans.

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Crude has risen this year on OPEC+ supply cuts and heightened tensions in the Middle East — the source of about a third of the world’s oil. Meanwhile, shifting expectations for US monetary policy are weighing on the demand outlook, and traders will look to a Federal Reserve meeting on Wednesday to gauge the prospects for rate cuts this year.

Despite the uncertain outlook, timespreads continue to signal bullishness. The gap between the two nearest Brent contracts was still more than $1 a barrel in backwardation. While the figure has come off slightly from last week’s highs, it’s still more than double what it was a month ago.

“Geopolitical risks have eased considerably,” said Warren Patterson, head of commodities strategy for ING Groep NV in Singapore. While the bank still expects a “deep deficit” this quarter, “the outlook for the second half of the year is less clear with it largely depending on OPEC+ policy,” he said.

Russia attacked Ukraine over the weekend with a heavy missile barrage aimed at natural gas infrastructure and other targets. Kyiv struck back with drones targeting an oil refinery in the Krasnodar region, with state-run news agency Tass reporting that the Slavyansk plant had partially suspended operations because of a fire.

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