Oil has stayed below $70 this month as fears of a trade war between the US and China weigh on prices, with neither side showing signs of backing down.
Escalating trade disputes have dimmed the outlook for economic growth and boosted the dollar, making oil more expensive for consumers using other currencies.
Analysts expect Iranian crude exports to fall by between 500,000 and 1.3 million barrels per day (Mmbpd), with buyers in Japan, South Korea and India already cutting orders.
Kloza says tighter inventories at Cushing, Oklahoma, a major crude hub, could push the price of WTI back above $70 in coming weeks, a level it has not seen this month.
Saudi Arabia told the Organization of the Petroleum Exporting Countries that it had reduced crude output by 200,000 barrels per day (bpd) to 10.29 million bpd in July.
"The energy complex is being increasingly jostled by fresh daily headlines that don't necessarily have much effect on current supply or demand on a short term basis but could dramatically affect oil balances when looking down the road just a few months", he said.
Fear of a fallout contagion are overshadowing reports and the ability of shale oil process to produce profitably, as well all reports that Iran fired off an anti-ship missile in its war games in the Strait of Hormuz.
The futures markets were further weakened late in the session after data from industry group the American Petroleum Institute (API) showed that USA crude stocks unexpectedly rose by 3.7 million barrels the week-ending August 10, compared with analysts' expectations for a drawdown of 2.5 million barrels.
Sentiment was also clouded by a darkening economic outlook which could start impacting oil demand, traders said.
In spite of the cautious mood in oil markets, bullish sentiment found some support from expectations that US sanctions against Tehran would restrict Iranian crude exports, tightening global supply.
According to state-run media in Iran, Chinese companies are keen on buying oil from Iran despite unilateral sanctions put in place by the United States.
While uneasiness about scarce oil supplies have cooled somewhat after Opec-member Saudi Arabia and other producers pumped more, the International Energy Agency warned that renewed American sanctions on Iran and disruptions elsewhere could be challenging.