The price of oil eased to below $89 a barrel on Tuesday as expectations of rising crude supplies pulled attention away from the conflict between Israel and the Palestinians.
By early afternoon in Europe, benchmark crude for December delivery was down 50 cents to $88.78 a barrel in electronic trading on the New York Mercantile Exchange.
On Monday, the contract added $2.36 to finish at $89.28 a barrel in New York, its highest point in nearly a month on rising concerns about the Middle East as well as optimism that U.S. political leaders will reach a budget deal before the end of the year, avoiding a hit to the economy.
But the price run-up may have been overdone, analysts said, pointing to more-than-adequate supplies.
Carl Larry of Oil Outlooks and Opinions said in an email commentary that U.S. oil production rose by 1 million barrels a day over the past year. In addition, U.S. lawmakers are pressing President Barack Obama to support TransCanada's proposed Keystone XL pipeline to transport crude oil from Canada to Gulf Coast refineries.
"We think that the production pace is only going to increase into 2013," Larry said. "So we're looking at two important steps to American oil independence."
While the escalating conflict between Israel and Hamas has raised concerns about Middle East crude supplies, analysts say the risk of immediate supply disruption isn't great because neither side is an oil producer.