Oil prices declined during Tuesday's Asian trade as escalating trade tensions between the United States and the European Union heightened fears of a global economic slowdown, raising concerns about weaker fuel demand.
By 3 pm AEST (5 am GMT), Brent crude futures dropped 68 cents or 1% to US$68.53 per barrel, while U.S. West Texas Intermediate (WTI) crude fell 69 cents or 1% to US$66.51 per barrel.
The August WTI contract expires on Tuesday, with the more active September contract down 70 cents or 1.1%, to $65.25 a barrel.
ANZ analysts wrote in a note to clients: "European Union envoys are set to meet as early as this week to formalise a plan to respond to a possible no-deal scenario with the U.S.
"The U.S. is now seen to want a near-universal tariff on E.U. goods higher than 10%, with increasingly fewer exemptions. The trade deal impasse could hurt economic activity and thus crude oil demand."
Analysts also noted the market was largely indifferent to the E.U.’s latest sanctions on Russia. "The market is also unperturbed by the E.U.’s latest sanctions packages on Russia. The latest measures include a lower price cap for Moscow’s crude. It will be set dynamically at 15% below market rates moving forward, which would see the threshold start off somewhere between USD45–50/bbl. However, there is little hope that the additional sanctions will ultimately impact Russian energy exports."
Investor sentiment has also been shaped by easing supply concerns. The 24 June ceasefire between Israel and Iran has helped stabilise the geopolitical backdrop, while major oil producers have begun increasing output.
Further signs of rising supply came from the Organisation of the Petroleum Exporting Countries and its allies (OPEC+), which are in the process of unwinding production cuts. Data from the Joint Organisations Data Initiative (JODI) released Monday showed that Saudi Arabia’s crude exports in May rose to their highest level in three months.
