(Alliance News) - Oil prices eased on Tuesday as the rally fizzled, with market participants keeping a close eye on persistent geopolitical risks and possible oversupply.

A barrel of Brent oil fetched USD64.86 early Tuesday afternoon in London, down from USD65.15 at the same time on Monday. West Texas Intermediate crude fell to USD62.77 a barrel from USD63.30.

The oil market advance paused on Tuesday after recording strong gains a day before.

Oil prices on Monday jumped due in part to geopolitical tensions, and "strengthened by short covering after hedge funds were caught holding one of the largest gross short positions in WTI and Brent futures in the past five years", analysts at Saxo said.

The energy market also rose on Monday after possibly a supply hike from Opec+ that fell short of expectations, ING analysts Warren Patterson and Ewa Manthey said.

"The spot oil market is still relatively tight," Patterson and Manthey said, adding: "Demand is set to pick up as we move into the summer months, suggesting prices are likely to remain relatively well supported."

Northern hemisphere, including the US and Europe, experiences summer from June.

"However, the market is likely to shift into a large surplus from the fourth quarter onwards," ING analysts said and cautioned: "This should put renewed downward pressure on oil prices later in the year."

Meanwhile, ongoing wildfires in Alberta, Canada, are offering further support to the oil market in the short run, they said.

The "bigger catalyst" lies in geopolitics, Pepperstone analyst Dilin Wu said, pointing out that the renewed escalation in the Russia-Ukraine conflict has reignited concerns over potential disruptions to energy supply chains.

In other commodities, spot gold was quoted at USD3,355.24 an ounce on Tuesday, up from USD3,352.63 on Monday. Silver firmed to USD34.30 an ounce from USD33.33.

The yellow metal on Tuesday pulled back after hitting the USD3,391 an ounce, but remained stronger.

"Signs of fatigue are beginning to emerge in financial markets following a turbulent first half of the year marked by heightened volatility," ActivTrades analyst Ricardo Evangelista said.

The drivers behind this volatility remain largely in place - persistent uncertainty surrounding global tariffs, elevated geopolitical tensions, a subdued economic outlook, and growing fiscal concerns in the US, Evangelista said.

The ActivTrades analyst expects gold to find continued support above the USD3,300 level.

But, he warned, gains may be capped in the near term by a renewed appetite for risk, as markets price in the possibility that the Trump administration's extreme tariff threats may not materialise.

"Another key influence on the outlook for gold is the behaviour of the dollar, which remains closely tied to expectations around the Federal Reserve's interest rate trajectory," ActivTrades' Evangelista said.

Market consensus anticipates at least two 25 basis point interest rate cuts in the US before the end of the year, Evangelista said. "However, greater clarity is unlikely before the summer, when the current uncertainty's real economic impact may manifest in slower growth and rising prices."

Elsewhere, platinum was priced at USD1,062.23 an ounce on Tuesday, up from USD1,047.71 on Monday. Palladium was quoted at USD999.52 an ounce, up from USD979.44.

Copper eased to USD9,601.00 per tonne from USD9,605.00, and aluminium was at USD2,452.00, down from USD2,468.00.

By Artwell Dlamini, Alliance News reporter

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