Oil prices fell on Thursday after a 3% rise in the previous session, as investors fear that higher US tariffs may be reinstated, which could lead to lower fuel demand, and amid expectations that major producers will announce an increase in production, UNN reports with reference to Reuters.
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Brent crude futures fell 45 cents, or 0.65%, to $68.66 a barrel by 06:45 GMT (09:45 Kyiv time). US West Texas Intermediate crude fell 44 cents, or 0.66%, to $67.01 a barrel.
Both contracts rose to their highest level in one week on Wednesday, as Iran suspended cooperation with the IAEA, raising fears that the dispute over the nuclear program could again escalate into armed conflict, and the US and Vietnam reached a preliminary trade agreement.
Nevertheless, uncertainty about US trade policy is growing, as the 90-day pause in the application of higher tariffs will end on July 9 without any new trade agreements with several major trading partners, such as the EU and Japan.
In addition, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, such as Russia, known as OPEC+, are likely to agree to increase production by 411,000 barrels per day at their meeting this weekend.
Given the uncertainty surrounding both events and the upcoming July 4th Independence Day holiday in the US, "market participants are likely to be unwilling to take on too much risk over the long US weekend," ING analysts said in a note on Thursday.
Worsening the negative sentiment, a private sector survey on Thursday showed that activity in China's services sector, the world's largest oil importer, grew at its slowest pace in nine months in June, as demand weakened and new export orders declined.
An unexpected rise in US oil inventories also highlighted concerns about demand from the world's largest oil consumer.
Analysts said the market would monitor the release of a key monthly US employment report on Thursday to form expectations about the depth and timing of interest rate cuts by the Federal Reserve in the second half of this year.
Lower interest rates can stimulate economic activity, which, in turn, will increase oil demand.
A private sector employment report on Wednesday showed a contraction for the first time in two years, although analysts warned that there was no correlation between it and government data.