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Oil prices ease on US tariffs and OPEC+ production expectations

The oil prices dropped slightly on Thursday, as concerns about the possible reinstatement of U.S. Tariffs raised doubts over demand in advance of an anticipated supply boost from major producers.

Brent crude futures dropped 34 cents or 0.49% to $68.77 per barrel at 1326 GMT. U.S. West Texas Intermediate Crude fell 31 cents or 0.46% to $67.14.

The two contracts reached their highest levels in a week on Wednesday, as the oil producer Iran halted cooperation with the U.N. Nuclear Watchdog. This heightened concerns that the long-running dispute over Iran's nuclear program could once again escalate into an armed conflict.

Prices were also raised by a preliminary trade agreement between the U.S.

However, tariff uncertainty is a major concern. The 90-day suspension of the higher U.S. Tariffs expires on July 9. Several large trading partners, such as the European Union and Japan have not yet concluded trade agreements, which raises concerns over the economic impact and its implications for fuel consumption.

The OPEC+ oil producer group is expected to increase its output by 411,000 barrels a day during their policy meeting this weekend.

A private sector survey revealed that in June, service activity in China -- the world's largest oil importer -- expanded at its lowest pace in nine-months as new export orders and demand declined.

The unexpected increase in U.S. crude oil inventories has also raised concerns about demand in the world's largest crude consumer.

Energy Information Administration reported on Wednesday that the U.S. crude oil inventories increased by 3.8 millions barrels, to 419,000,000 barrels. In a poll, analysts had predicted a drop of 1.8 millions barrels.

Data showed that the U.S. unemployment rate dropped unexpectedly in June, while job growth was strong. This could allow the Federal Reserve to defer its decision to cut interest rates.

"Thursday’s jobs report exceeded expectations, which shows the resilience we've seen in the economy for the past few months is still intact." David Laut, Chief Investment Officer of Abound Financial, said that we still expect the Federal Reserve will continue to wait and see on interest rates. (Reporting and editing by Barbara Lewis; Robert Harvey)

(source: Reuters)