Oil prices have declined as the outlook for fuel demand weakened following trade tensions and troubled emerging markets, but there are hints of tighter supply going forward due to sanctions by the US against Iran.

Benchmark Brent crude declined 25 cents and traded at $72.56 per barrel, while US light crude fell 25 cents to $67.38 a barrel, Reuters reported.

Due to the financial crisis in Turkey, the risk of contagion throughout emerging economies increased, dragging down South Africa’s rand, Argentina and Mexico’s peso, in addition to Russia’s rouble and emerging market stocks. This also curbed the outlook for fuel demand.

A Phillip Futures spokesperson said: “Trade protectionism and escalating tensions between the world’s largest economies, the United States and China, have cast a looming shadow on global oil demand growth in 2018.”

"Trade protectionism and escalating tensions between the world’s largest economies, the United States and China, have cast a looming shadow on global oil demand growth in 2018."

According to data from the US Commodity Futures Trading Commission, hedge funds and other money managers reduced their bullish positions in US crude futures and options in the week ending on 7 August.

The brokerage added that hedge funds had cut bullish bets on oil due to an increase in production levels from Organization of the Petroleum Exporting Countries (OPEC) and the US.

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By GlobalData

Last week, energy companies in the US increased their number of active oil rigs with the addition of ten rigs bringing the total count to 869, according to Baker Hughes.

The US has started implementing new sanctions against Iran, the third largest producer among the OPEC members.