US tariff uncertainty looms, OPEC+ set to raise output
Brent crude futures fell 45 cents, or 0.65 per cent, to $68.66 a barrel by 0645 GMT. US West Texas Intermediate crude declined 44 cents, or 0.66 per cent, to $67.01 a barrel Both contracts rose to their highest in one week on Wednesday as Iran suspended cooperation with the UN nuclear watchdog, raising concerns the lingering dispute over the Middle East producer's nuclear programme may again devolve into armed conflict, and the US and Vietnam reached a preliminary trade deal.
Still, there is increasing uncertainty around US trade policy as the 90-day pause on the implementation of higher tariffs will end on July 9 without any new trade deals with several large trading partners such as the European Union and Japan.
Additionally, the Organization of the Petroleum Exporting Countries (OPEC) and its allies such as Russia, known as OPEC+ will likely agree to raise their output by 411,000 barrels per day (bpd) at their meeting this weekend.
With the uncertainty around both events, and the upcoming July Fourth Independence Day holiday in the US, "market participants will probably not want to carry too much risk into the long US weekend," ING analysts said in a note on Thursday.
Adding to the negative sentiment, a private-sector survey showed on Thursday that service activity in China, the world's biggest oil importer, expanded at the slowest pace in nine months in June as demand weakened and new export orders declined.
A surprise build in US crude inventories also highlighted demand concerns in the world's biggest crude consumer.
The US Energy Information Administration said on Wednesday that domestic crude inventories rose by 3.8 million barrels to 419 million barrels last week. Analysts in a Reuters poll had expected a drawdown of 1.8 million barrels.
Gasoline demand on a weekly basis dropped to 8.6 million barrels per day, prompting concerns about consumption in the peak US summer driving season.
The market will be watching the release of the key US monthly employment report on Thursday to shape expectations around the depth and timing of interest rate cuts by the Federal Reserve in the second half of this year, analysts said.
Lower interest rates could spur economic activity, which would in turn boost oil demand.
A private payrolls report on Wednesday showed a contraction for the first time in two years, though analysts cautioned there is no correlation between it and the government data. — Reuters
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