Oil prices declined on Tuesday amid concerns the brewing trade war between major crude consumers the U.S. and the European Union will curb fuel demand growth by lowering economic activity.

Brent crude futures were down 28 cents, or 0.40%, to $68.93 a barrel at 0658 GMT. U.S. West Texas Intermediate crude was at $66.83 a barrel, down 37 cents, or 0.55%. Both benchmarks settled slightly lower on Monday.

The August WTI contract expires on Tuesday and the more active September contract (CLc2) was down 29 cents, or 0.44%, to $65.66 a barrel.

“Broad demand concerns continue to simmer amid escalating global trade tensions, especially as markets eye the latest tariff threats between major economies and Trump’s potential announcements ahead of the August 1 deadline,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.

“Investors are also eyeing the ripple effects of fresh U.S. sanctions on Russian crude,” she added.

Supply concerns have largely been alleviated by major producers raising output and since a ceasefire on June 24 ended the conflict between Israel and Iran. However, investors are increasingly worried about the global economy amid U.S. trade policy changes.

A weaker U.S. dollar has provided some backing for crude as buyers using other currencies are paying relatively less.

Prices have slipped “as trade war concerns offset the support by a softer (U.S. dollar),” IG market analyst Tony Sycamore wrote in a note.

Sycamore also pointed to the possibility of an escalation in the trade dispute between the U.S. and the EU over tariffs.

The EU is exploring a broader set of possible counter-measures against the United States as prospects for an acceptable trade agreement with Washington fade, according to EU diplomats. The U.S. has threatened to impose a 30% tariff on EU imports on August 1 if a deal is not reached.

There are also signs that rising oil supply has entered the market as the Organization of the Petroleum Exporting Countries and its allies unwind output cuts.

Saudi Arabia’s crude oil exports in May rose to their highest in three months, data from the Joint Organizations Data Initiative showed on Monday.
Source: Reuters