Oil prices settled lower Tuesday, as traders weighed Middle East tensions amid little sign of progress on talks for a ceasefire in Gaza and fresh signs that Israel hasn't given up on plans to launch an offensive in Rafa.           

At 14:30 ET (18:30 GMT), West Texas Intermediate crude futures settled 1.4% lower at $85.23 a barrel, while Brent oil futures expiring in June fell 1.1% to $89.40 a barrel.

Gaza ceasefire talks ongoing, Israel's Netanyahu says 'date set' Rafah offensive

Israeli Prime Minister Benjamin Netanyahu said a date has been set to launch an offensive Rafah in southern Gaza. Netanyahu continues to suggest that an offensive in Rafa is key to defeating Hamas. 

The update came just as talks for a Gaza ceasefire continued, though there is little sign of progress that Hamas is willing to be accept the ceasefire proposal amid demands for a complete withdrawal of Israeli soliders from Gaza.   

Fears of worsening geopolitical conditions in the Middle East have been a key point of support for crude over the past month, especially as Iran threatened military action against Israel over an alleged strike on an embassy in Syria. 

Houthi strikes on vessels in the Red Sea have already disrupted some oil supplies, and any more supply disruptions are likely to further tighten global oil markets.

The outlook for oil markets had already been tightened by the Organization of Petroleum Exporting Countries and allies recently maintaining its pace of production cuts until end-June. 

EIA lifts demand outlook 

The Energy information Administration raised its outlook for global oil demand, forecasting hgiher consumption for 2024 and 2025. 

The EIA now expects global oil consumption of 102.91 million barrels per day, up 0.5% frin a prior forecast, though oil output was also raised by 0.5% to 102.65Mbpd for 2024, and by 0.4% to 104.6Mbpd.

Against the backdrop of higher demand, the energy agency said it now sees WTI ending the year at $83.78 this year, up 2% from a prior forecast.   

The updates comes just ahead of fresh inventory data due later from the American Petroleum Institute in the session and EIA inventory data due Wednesday.