An oil rig in the US. Credit: Don Barrett.

The oil market remains tense after the trade dispute between the US and China intensified, which could cause an economic slowdown worldwide.

Brent crude oil futures dropped 81 cents to $70.43 per barrel, while the US West Texas Intermediate (WTI) crude futures fell 57 cents to trade at $61.68 a barrel, Reuters reported.

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Market analysts opined that the Brent crude prices dragged as the chances of the US and China reaching a mutually agreed trade deal jolted early this week.

The US President also announced plans to impose new import tariffs on Chinese goods citing slow progress in negotiations.

On the supply side, the oil markets continued remained tightened after the US increased sanctions on Iranian oil exports.

“The US President announced plans to impose new import tariffs on Chinese goods citing slow progress in negotiations.”

In addition, the US also announced plans to boost its military presence in the Middle East. After this, Iran threatened with ‘reciprocal actions’, which may include resuming their nuclear programme.

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In the last year, Iranian crude oil exports dropped below one million barrels per day, which may further plummet to as low as 500,000bpd this month after Washington DC further tightened the sanctions.

The US has also placed sanctions on Venezuela, another key petroleum producer and Organization of the Petroleum Exporting Countries (OPEC) member.

Bank of America Merrill Lynch was quoted by the news agency as saying in a note: “The Venezuelan political situation seems untenable but oil exports could continue to contract until the industry receives a capital injection, a dim prospect for now.”

The market expects Saudi Arabia to increase its production levels to make up for the Iranian production. Merrill Lynch added that it expects Saudi Arabia ‘to bring back oil production slowly’ as Iranian crude exit the market.