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Oil prices slipped in early trade on Tuesday, extending declines from the previous session as investors took stock of a potential ceasefire between Israel and Hezbollah, weighing on oil's risk premium.

Brent crude futures fell 28 cents, or 0.38%, to $72.73 a barrel by 0106 GMT, while U.S. West Texas Intermediate crude futures were at $68.62 a barrel, down 32 cents, or 0.46%.

Both benchmarks settled down $2 per barrel on Monday following reports that Lebanon and Israel had agreed to the terms of a deal to end the Israel-Hezbollah conflict, which triggered a crude oil selloff.

"A ceasefire in Lebanon reduces the likelihood that the incoming U.S. administration will impose stringent sanctions on Iranian crude oil," ANZ analysts said.

Iran, which backs Hezbollah, is an OPEC member with production of around 3.2 million barrels per day, or 3% of global output.

If President-elect Donald Trump's administration returned to a maximum-pressure campaign on Tehran, Iranian exports could shrink by 1 million bpd, analysts have said, tightening global crude flows.

In Europe, Ukraine's capital of Kyiv was under a sustained Russian drone attack on Tuesday, Mayor Vitali Klitschko said.

Hostilities between major oil producer Russia and Ukraine intensified earlier this month after U.S. President Joe Biden allowed Ukraine to use U.S.-made weapons to strike deep into Russia in a significant reversal of Washington's policy in the Ukraine-Russia conflict.

Elsewhere, OPEC+ may consider leaving its current oil output cuts in place from Jan. 1 at its next meeting on Sunday, Azerbaijan's Energy Minister Parviz Shahbazov told Reuters, as the group had already postponed hikes amid demand worries.

U.S. President-elect Donald Trump said he would sign an executive order imposing a 25% tariff on all products coming in to the U.S. from Mexico and Canada. It was unclear whether this would include crude oil imports.

The vast majority of Canada's 4 million barrels per day (bpd) of crude exports go to the U.S., and analysts have said it is unlikely Trump would impose tariffs on Canadian oil, which cannot be easily replaced since it differs from grades that the U.S. produces.