By Shariq Khan
BENGALURU (Reuters) -Oil prices settled lower on Friday after the Islamist group Hamas released two U.S. hostages from Gaza, leading to hopes the Israeli-Palestinian crisis could de-escalate without engulfing the rest of the Middle East region and disrupting oil supplies.
Brent crude futures fell 22 cents, or 0.2%, to settle at $92.16 a barrel.
U.S. West Texas Intermediate crude futures for November delivery, which expired after settlement on Friday, fell 62 cents, or 0.7%, to $88.75 a barrel. The more-active December WTI contract closed 29 cents lower at $88.08 a barrel.
Hamas' armed wing released two U.S. hostages from Gaza - a mother and her daughter - "for humanitarian reasons" in response to Qatari mediation efforts in the war with Israel, its spokesman Abu Ubaida said on Friday.
"The report took some of the risk premium out of the market," said Phil Flynn, analyst at Price Futures Group. "The market went from starting the day with little hope and went to possible signs that there may be some way out of this crisis."
Both contracts had gained more than a dollar per barrel during the session on signs of escalation of the conflict. For the week, both front-month contracts rose over 1%, a second straight weekly jump.
On Thursday, Israeli Defence Minister Yoav Gallant told troops at the Gaza border they would soon see the Palestinian enclave "from inside," and the Pentagon said the U.S. had intercepted missiles fired from Yemen toward Israel.
"The Middle East remains a big focus of the market because of fears of a region-wide conflict that would likely involve a disruption of oil supplies," said John Kilduff, a partner at New York-based Again Capital.
Supply disruptions may be less likely now, Kilduff added, but "the market cannot ignore it - especially heading into the weekend when things could change rapidly and there will be no trading."
Also supporting prices were forecasts of a tightening market in the fourth quarter after top producers Saudi Arabia and Russia extended supply cuts to year end.
Large inventory draws, mostly in the U.S., support the thesis of an undersupplied market, UBS analyst Giovanni Staunovo said.
UBS expects Brent prices to trade in the $90 to $100 a barrel range over the coming sessions, Staunovo added.
Money managers cut their net long U.S. crude futures and options positions by 56,850 contracts to 183,351 in the week to Oct. 17, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.