Oil prices fell slightly on Thursday as the possibility of renewed U.S. tariffs raised questions about demand ahead of expected supply increases by major producers.

Brent crude futures fell 63 cents, or 0.91%, to settle at $68.48 a barrel by 11:12 a.m. EDT (1512 GMT). U.S. West Texas Intermediate crude fell 77 cents, or 1.14%, to settle at $66.68.

Both contracts hit one-week highs on Wednesday as Iran, a major oil producer, suspended cooperation with the U.N. nuclear watchdog, raising concerns that a lingering dispute over its nuclear program could escalate into armed conflict.

A preliminary trade deal between the U.S. and Vietnam boosted prices on Wednesday, but overall tariff uncertainty looms large. A 90-day pause on higher U.S. tariffs expires on July 9, and several major trading partners have yet to reach a trade deal, including the European Union and Japan. Oil traders are worried about the impact on the economy and fuel demand.

Also weighing on prices, OPEC+ is expected to agree to raise output by 411,000 barrels per day at its policy meeting later this week. Also, a private sector survey showed service activity in China - the world's biggest oil importer - expanded in June at the slowest pace in nine months as demand weakened and new export orders fell.

A surprise build in U.S. crude inventories also highlighted demand concerns in the world's biggest crude consumer. The U.S. 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 decline of 1.8 million barrels.

U.S. job growth was solid in June while the unemployment rate fell unexpectedly, data showed on Thursday. That could allow the Federal Reserve to wait longer before cutting interest rates.

"Thursday's jobs report was stronger than expected, which shows that the resilience we've seen in the economy over the past few months is still intact. We still expect the Federal Reserve to continue its wait-and-see approach on interest rates," said David Laut, chief investment officer at Abound Financial. (alg)

Source: Reuters