An oil price rally driven by Middle East violence lost some momentum yesterday after Israelis and Palestinians agreed to try to end some of their worst bloodshed in decades.
The potential for upward price spikes remained, as markets demonstrated by leaping briefly on hardline comments by some of the region's most militantly anti-Israeli figures.
Benchmark Brent crude was two cents stronger at $30.90 a barrel. November US light crude was down 17 cents at $32.75.
Brent is now 12 per cent below a 10-year peak of $35.30 it hit last Thursday but remains above the $30 level that the United States has said marks the start of dangerously high prices.
An early push higher crumbled and shed some gains after Israelis and Palestinians agreed at a crisis summit at Egypt's Sharm al-Sheikh resort to try to end 20 days of violence.
Later Brent shot up 50 cents in the early evening after Iran's defence minister urged Muslim countries to use their role as oil producers to support Palestinians against Israel.
He was apparently referring to a suspension of supplies to Western nations to punish support for the Jewish state, an option chosen by Arab producers in the 1973 Arab-Israeli war.
The market was also kept on edge by the spiritual leader of the Islamic militant group Hamas, Sheikh Ahmed Yassin, who said the accord was not binding "because it is imposed from America and Israel on the Palestinian people".
He said Palestinians will continue in "resisting the occupation".
But the market's mood lacked the extreme volatility of last week when panic buying sent Brent to a 10-year peak of $35.30. Bulls retreated cautiously yesterday on word that Israel and the Palestinians had agreed to halt violence, set up an inquiry into its causes and explore a return to peace talks.
Traders nevertheless expressed doubts that the deal to end the bloodshed would work, given high tensions in the region. The Middle East tensions are stoking fears of supply shortages as the United States, the world's largest oil consumer, heads into peak winter demand season with thin stocks.
