Oil edges lower as trade war concerns increase worries about fuel demand

Oil prices edged down on Tuesday as 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 weighed on investor sentiment.

Brent crude futures fell 24 cents, or 0.35%, to $68.97 a barrel by 0055 GMT after settling 0.1% lower on Monday.

U.S. West Texas Intermediate crude was at $66.99 a barrel, down 21 cents, or 0.31%, following a 0.2% loss in the previous session.

The August WTI contract expires on Tuesday and the more active September contract was down 23 cents, or 0.35%, to $65.72 a barrel.

Still, the oil market has struggled to find any direction since the ceasefire on June 24 ending the conflict between Israel and Iran removed concerns about major supply disruptions in the key Middle East producing region.

Since then, Brent has traded in a range of $5.19 and WTI in a range of $5.65 as supply concerns have been alleviated by major producers raising output and investors are increasingly worried about the global economy amid U.S. trade policy changes. However, 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 rising supply has entered the market as the Organization of the Petroleum Exporting Countries and their 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 (JODI) showed on Monday.