Oil prices declined on Thursday as U.S. President Donald Trump's August 1 tariff deadline loomed over investors, with uncertainty surrounding countries yet to negotiate a trade deal with the U.S.

Brent crude futures for September expired on Thursday and settled down 71 cents, or 0.97% to $72.53 a barrel. U.S. West Texas Intermediate crude for September settled down 74 cents, or 1.06%, to $69.26. U.S. crude futures fell more than $1 earlier in the session.

Both benchmarks had recorded 1% gains on Wednesday.

Countries that haven't negotiated a trade deal or received a tariff letter from the Trump administration will be hearing from the U.S. about the terms of trade by the end of the day, the White House said on Thursday.

The U.S. has cut deals with two-thirds of its top 18 trade partners.

Trump said he and Mexican President Claudia Sheinbaum had agreed to extend an existing trade deal between their countries for 90 days and to continue talks over that period with the goal of signing a new deal.

"Mexico will continue to pay a 25% Fentanyl Tariff, 25% Tariff on Cars, and 50% Tariff on Steel, Aluminium, and Copper. Additionally, Mexico has agreed to immediately terminate its Non Tariff Trade Barriers, of which there were many," Trump said in a social media post.

News of the extension weighed on crude futures, said John Kilduff, partner at Again Capital in New York.

"Overall the tariffs are negative for oil demand going forward, and this situation with Mexico kicks the can down the road," Kilduff said.

U.S. inflation increased in June as tariffs boosted prices for imported goods such as household furniture and recreation products, supporting views that price pressures would pick up in the second half of the year and delay the Federal Reserve from cutting interest rates until at least October.

Lower interest rates reduce consumer borrowing costs and can boost economic growth and demand for oil.

Meanwhile, U.S. crude oil production rose to a record 13.49 million barrels per day in May, data from the U.S. Energy Information Administration showed.

U.S. crude output was up 24,000 bpd in May from the prior record in April, the EIA data showed.

U.S. crude oil inventories rose by 7.7 million barrels to 426.7 million barrels in the week ending July 25, driven by lower exports, the EIA said on Wednesday. Analysts had expected a draw of 1.3 million barrels. [EIA/S]

Gasoline stocks fell by 2.7 million barrels to 228.4 million barrels, far exceeding forecasts for a draw of 600,000 barrels.​

"U.S. inventory data showed a surprise build in crude stocks, but a bigger-than-expected gasoline draw supported the view of strong driving season demand, resulting in neutral impact on the oil market," said Fujitomi Securities analyst Toshitaka Tazawa.

RUSSIA THREAT CURBS LOSSES

The threat of U.S. sanctions on Russia has helped support oil prices this week.

Source: Investing.com