Brent crude dropped 0.21 percent to $88.21 a barrel, and US WTI crude fell 0.24 percent to $82.43 a barrel.

The geopolitical risk premium in oil prices was unwound due to the potential ceasefire, and the upcoming Federal Reserve meeting added to near-term reservations.

Hamas negotiators left Cairo after talks on a response to Israel's phased truce proposal.

While they were in Cairo, Israeli airstrikes killed dozens of Palestinians, mostly in Rafah.

The attacks have urged foreign leaders not to invade the city.

Separately, continued attacks by Yemen's Houthis on maritime traffic near the Suez Canal have kept oil prices stable and could lead to higher prices due to anticipated supply disruptions.

Additionally, elevated interest rates in the US could strengthen the dollar and potentially impact oil demand.

The Houthis, a Iran-aligned militant group, announced attacks on three vessels in two different seas: the US destroyers Thunder and USS Firebolt in the Red Sea, and the MSC Orion in the Indian Ocean.

Meanwhile, investors are focusing on the US Federal Reserve's policy review on May 1, where expectations for interest rate cuts have been pushed back due to persistent inflation.

Some investors are even pricing in a possibility of a quarter percentage point interest rate hike this year and next.

Furthermore, concerns over decreasing demand for oil due to falling diesel and heating oil premiums have also weighed on sentiment.

The US four-week average energy consumption is currently close to the lowest point of the past five years based on data from the Energy Information Administration, according to ANZ.