Oil prices fell on Friday, settling at a three-week low, on dented optimism over US trade talks leading to deals with its key partners before a deadline on August 1 next week.
Brent, the benchmark for two thirds of the world's oil, dropped 1.07 per cent on Friday to settle at $68.44 a barrel, while West Texas Intermediate, the gauge that tracks US crude, closed 1.32 per cent down at $65.16 a barrel.
For the week, Brent was down about 1 per cent, with WTI down about 3 per cent.
US President Donald Trump said on Friday that the US has a 50-50 chance of reaching a trade deal with Europe, in contrast to the optimism the bloc’s diplomats expressed during the week.
"Advancing talks between Washington and the European Union raise hopes of further trade easing, potentially strengthening expectations around demand for crude. Yet, lingering uncertainties around the scope and timing of these agreements could moderate enthusiasm, suggesting limited near-term upside," Osama Al Saifi, managing director for Mena at Traze, said.
The EU is seeking to sign a deal with the US involving a baseline 15 per cent tariff on imports from the bloc and other possible exemptions, according to media reports on Friday.
EU chief Ursula von der Leyen and Mr Trump said on Friday they would meet in Scotland this weekend to tackle a months-long transatlantic trade standoff.
"We'll see if we make a deal," Mr Trump said, adding that the chance of a deal was "50-50", with sticking points remaining on "maybe 20 different things."
"But we're meeting ... with the European Union. And that would be, actually, the biggest deal of them all, if we make it," he said.
Earlier in the week, the US, the world’s largest economy, and Japan struck what Mr Trump claimed was the “largest trade deal in history”.
Japan will now pay 15 per cent tariffs on exports to the US, as opposed to the 25 per cent threatened by the Trump administration previously. That is in addition to other concessions that would address the US trade deficit with Japan.
Indian officials have also expressed confidence in reaching a trade deal with the US before the August 1 deadline. Brazil and Mexico also indicated interest in strengthening commercial ties, according to Soojin Kim, research analyst at MUFG Bank.
Oil prices fell on Friday's market close, reversing gains earlier in the day.
“Oil prices are back on the rise on optimism about the global economy as the Trump administration takes action to win the artificial intelligence race and may be close to getting to secure favourable trade deals with the European Union and with China,” said Phil Flynn, senior analyst with Price Futures Group.
Mr Trump unveiled a three-pillared AI strategy on Wednesday as the country focuses on becoming a dominant player in the field.
The strategy includes accelerating artificial intelligence innovation as well as building AI infrastructure in the US that is expected to boost demand for energy.
However, broader crude market fundamentals “remain under pressure as rising Opec+ output stokes fears of oversupply”, Ms Kim said.
“With summer demand expected to ease and production likely to stay high, inventories may build sharply in the coming months, potentially driving Brent prices down towards $60 per barrel.”
Opec+ countries including Saudi Arabia, Russia and other producers, have been easing cuts and boosting output since April in anticipation of higher demand.
The group will boost production by 548,000 bpd for August, it said this month, after increasing output by 411,000 bpd for each of May, June and July. The group also approved an increase of 138,000 bpd in April.
The Opec+ group’s next policy meeting is scheduled for August 3.
Oil prices have remained volatile this year as they have been affected by a number of factors including Iran nuclear talks, Trump tariffs, crude oil increases from Opec+ and geopolitical tensions between Iran and Israel.
