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Oil prices eased in early trade on Tuesday as anxiety over the global demand outlook for oil offset geopolitical tensions in the Middle East and supply worries following an attack on a Russian fuel export terminal over the weekend.

Brent crude futures fell 14 cents, or 0.2%, to $79.92 a barrel by 0125 GMT, while U.S. West Texas Intermediate crude futures (WTI) were last down 10 cents, or 0.1%, at $74.66 a barrel.

Both the contracts had settled about 2% higher on Monday, as a Ukrainian drone strike on Novatek's Ust-Luga fuel export terminal raised supply concerns and drove up prices. Analysts say Novatek is likely to resume large-scale operations there within weeks.

While damage to loading berths at the Ust-Luga terminal only "briefly impacted exports," the move raises the prospect of the Russia-Ukraine war "moving into a new phase where parties target key energy infrastructure," analysts at ANZ Research said in a note.

The geopolitical tensions have been eclipsed by persistent concerns over China's stuttering economic recovery, which has in turn raised worries about global oil demand given the Asian giant is the world's biggest crude oil importer.

Chinese policymakers have rolled out a raft of measures to shore up the economy but domestic consumption remains tepid, leaving oil traders on edge about the demand prospects.

In the Middle East, the United States called for Israel to protect innocent people in hospitals, medical staff and patients as Israeli forces stormed a hospital and put another under siege as they advanced deep into western Khan Younis in Gaza.

U.S. and British forces have also carried out a fresh round of strikes targeting a Houthi underground storage site and missile and surveillance capabilities used by the Iran-aligned Houthi group.

The attacks by the Houthis on vessels in and around the Red Sea region have disrupted global shipping and stoked fears of inflation. The group has said their attacks are in solidarity with Palestinians as Israel strikes Gaza.

Separately, a Reuters poll showed that U.S. crude oil inventories were forecast to fall by about 3 million barrels in the week to Jan. 19. Distillate stockpiles were expected to drop last week, while gasoline inventories were set to rise. [EIA/S]