Oil prices headed sharply lower Tuesday on expectations that OPEC and other major oil producers will announce a decision to raise production at a meeting later this week.
Trade tensions between the U.S. and China have also intensified, raising concerns over a possible decline in energy demand.
West Texas Intermediate crude for July delivery CLN8, -1.81% lost $1.39, or 2.1%, to $64.46 a barrel on the New York Mercantile Exchange. Prices haven’t settled below $65 since April 9, according to FactSet data.
August Brent oil LCOQ8, -0.69% —the international benchmark—fell 51 cents, or 0.7%, to $74.83 a barrel on ICE Futures Europe, on the heels of Monday’s 2.6% climb. It’s poised for its lowest finish since May 3.
Oil traders were watching any indications of what might happen at the Organization of the Petroleum Exporting Countries’ meeting at the end of the week. OPEC Countries and a group of non-cartel countries led by Russia are expected to increase production at the meeting, but the main producers appear to disagree on the size of an increase, according to media reports.
Read: OPEC risks destroying its oil market success
“Quite a conflict appears likely at Friday’s OPEC+ meeting: according to Ecuador, Saudi Arabia and Russia will propose that oil production be raised by 1.5 million barrels per day—in line with Russia’s position,” said analysts at Commerzbank in a note.
But the oil producers fail to come to an agreement, oil prices may continue to decline. Lukman Otunuga, research analyst at FXTM, said “oil remains at risk of depreciating further if Friday’s OPEC meeting in Vienna ends in an impasse.”
He emphasized that “Iran, Venezuela and Iraq are expected to veto any decision made by Saudi Arabia and Russia to raise production levels,” and “any disagreements or infighting between cartel members during the talks may trigger fears over the future of OPEC’s production-cut deal.”
Read: Why Goldman Sachs still sees oil peaking above $82 a barrel this summer
The losses for oil came as rhetoric between the U.S. and China intensified after President Donald Trump threatened Beijing with more tariffs. Trump said on Monday evening he might slap an additional $200 billion or more in tariffs on Chinese goods, on top of the $50 billion his administration has already detailed.
China responded on Tuesday, saying Beijing will have no choice but to take comprehensive measures in response to the U.S.’s trade moves.
China has hinted it may add an import tax on U.S. crude, which could hit U.S. energy exports and weigh on prices.
Meanwhile, traders also kept an eye on growth in U.S. crude production. Tyler Richey, co-editor of the Sevens Report, said the weekly Energy Information Administration’s petroleum status report will be important to watch because of the U.S. production spike of 100,000 barrels a day reported in the previous report. That was the largest since the first week of February, he said.
The report is also forecast to reveal a sizable 3.7 million-barrel decline in domestic crude stockpiles for the week ended June 15, according to analysts polled by S&P Global Platts. Supply declines of 1 million barrels for gasoline and 700,000 barrels for distillates were also expected.
On Nymex, July gasoline RBN8, -0.95% fell 0.9% to $2.035 a gallon, and July heating oil HON8, -0.69% gave up 1% to $2.11 a gallon.
July natural gas NGN18, -1.93% lost 1.8% to $2.899 per million British thermal units.