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Oil prices fall as concerns about trade wars increase fuel demand

Oil prices fall as concerns about trade wars increase fuel demand

Investor sentiment was impacted by the decline in oil prices on Tuesday, as fears that a brewing trade conflict between the U.S.A. and European Union would reduce fuel demand growth through a reduction of economic activity dampened investor confidence.

Brent crude futures dropped 52 cents or 0.75% to $68.69 per barrel at 0325 GMT. U.S. West Texas Intermediate Crude was $66.69 per barrel, down by 51 cents or 0.76%. Both benchmarks ended the day slightly lower.

The WTI August contract expires Tuesday, and the September contract, which is more active, was down 54 cents or 0.82% to $65.41 per barrel.

"Broad Demand Concerns continue to simmer amid escalating trade tensions in the global market, particularly as markets watch the latest threats of tariffs between major economies, and Trump's possible announcements before August 1 deadline," said Priyanka Sackdeva, Senior Market Analyst at Phillip Nova.

She added that investors are also looking at the ripple effect of new U.S. sanctions against Russian crude.

Concerns about supply have been largely alleviated since major producers increased output and a ceasefire between Israel and Iran on June 24, ended the conflict. Investors are becoming increasingly concerned about the global economy due to changes in U.S. Trade Policy.

The weaker dollar has helped to support crude oil prices as buyers of other currencies pay less.

In a recent note, IG analyst Tony Sycamore noted that prices have fallen "as trade-war concerns offset the support provided by a softer dollar".

Sycamore has also suggested that the tariff dispute between the U.S.A. and EU could escalate.

According to EU diplomats, the EU is looking at a wider range of counter-measures that could be taken against Washington as prospects for a trade agreement are fading. US has threatened to impose 30% tariffs on EU imports if no deal is reached by August 1.

As the Organization of the Petroleum Exporting Countries (OPEC) and its allies reduce their output, there are signs of a rising oil supply on the market.

Saudi Arabian crude oil exports rose in May to their highest level in three months according to data released by the Joint Organizations Data Initiative on Monday. (Reporting from Anjana Anil, Bengaluru; Sudarshan Varadhan, Singapore; editing by Christian Schmollinger & Jamie Freed).

(source: Reuters)