Oil prices fell about two per cent overnight as an unexpected build in US crude inventories compounded investor worries that a trade fight between the US and China could dent crude demand over the long haul.
Brent crude futures settled at $US70.99 a barrel, dropping $US1.19 or 1.7 per cent.
US West Texas Intermediate (WTI) crude futures ended $US1.71, or 2.7 per cent, lower at $US61.42 a barrel.
US crude inventories swelled by 4.7 million barrels in the latest week to their highest since July 2017 at 476.8 million barrels, the US Energy Information Administration reported.
Analysts polled by Reuters had predicted a decrease of 599,000 barrels.
“It’s at the extreme end of the range of possibilities for a bearish report,” said Bob Yawger, director of futures at Mizuho in New York.
“It’s about as bad as it could have been considering the fact that driving season is so close.”
Petrol stocks posted a surprise build as well, rising by 3.7 million barrels compared with analysts’ expectations for an 816,000-barrel drop, despite steady petrol demand heading into peak driving season.
“Refiners are running at a subdued pace for this time of year,” which contributed to the builds, said Again Capital LLC partner John Kilduff in New York.
The prospect of a long-term tariff war between China and the United States also pressured prices.
Additional talks between top officials have not been scheduled since the last round ended in a stalemate on May 10, when US President Donald Trump imposed the higher levies on Chinese goods.
US Treasury Secretary Steven Mnuchin said his country was at least a month away from enacting its next round of tariffs on Chinese imports as it studies the impact on consumers.
The conflict is weighing on economic growth forecasts and oil demand predictions.
The Organisation for Economic Co-Operation and Development (OECD) on Tuesday revised down its global growth forecast for the year.
A slump in equities, which oil futures often follow, deepened the fall in oil prices.
Growing tensions between the United States and Iran, which could lead to supply disruptions, helped limit losses.
The prospect that the Organisation of the Petroleum Exporting Countries and its allies will continue its output cut pact later in the year was also supportive.
The government of Saudi Arabia, OPEC’s de facto leader, said it was committed to a balanced and sustainable oil market.
US bank Morgan Stanley said it expected Brent prices to trade in a $US75-$US80 per barrel range in the second-half of this year, pushed up by tight supply and demand fundamentals.