Oil prices fell on Tuesday for a third consecutive session after fresh tensions mounted following a possible trade showdown between the US and Europe, with Brent crude declining by 82 cents or 1.2 per cent to $68.39 a barrel and the US West Texas Intermediate (WTI) crude down by $1.05 or 1.6 per cent to $66.15 per barrel.
The European Union (EU) was exploring a broader set of possible counter-measures against the US as trade agreement hopes with the US faded.
US President Donald Trump had set an August 1 deadline for countries to secure trade deals or face steep tariffs. He had threatened a 30 per cent tariff on EU imports if no deal was reached.
Tariffs raise the risk of slower economic growth, which could reduce global fuel demand and drag oil prices lower.
Reuters reported that prospects of an interim trade deal between the US and India before that deadline have also dimmed.
Market analyst’s noted that crude price declines may be limited by the possibility that the US could scale back the tariffs it has threatened or even delay them.
Meanwhile, there’s growing optimism that a new US-Japan trade pact could reinvigorate global economic momentum and spur energy demand.
A sweeping trade agreement between the US and Japan, was announced Tuesday by President Trump and the deal includes a reduction in proposed tariff from 25 per cent to 15 per cent on Japanese imports. It also secures a $550 billion Japanese investment in the US economy. In return, Japan will expand market access for American goods, including cars, agricultural products, and energy exports.
Support also came as data from the American Petroleum Institute (API) reported an unexpected draw of 577,000 barrels in US crude inventories for the week ending July 18.
Gasoline (petrol )stockpiles also fell by 1.2 million barrels, while distillate stocks (covering diesel and heating oil) rose by 3.48 million barrels.
Official data from the US Energy Information Administration (EIA) will be released later on Wednesday.