Oil rose on Tuesday, boosted by the prospect of a potential slowdown in US crude production growth, although higher Russian output and Saudi Arabia possibly cutting its selling prices acted as a drag.

The mood across financial markets was cautious after China had announced last week it would slap extra tariffs on 128 US products , deepening a dispute between the world's two biggest economies and stoking concerns about the impact on global growth.

Brent crude futures were last up 47 cents on the day at $68.11 a barrel by 0856 GMT, while West Texas Intermediate futures were up 39 cents at $63.40 a barrel.

Oil prices fell more than 3 per cent on Monday, marking its largest one-day fall since June, following a sharp sell-off on Wall Street as the tech sector came under fire.

“For oil, politics drives the market noise with the trade dispute and the geopolitically more hawkish US government pushing prices either way,” Julius Baer head of commodities and macro research Norbert Ruecker said.

Greg McKenna, chief market strategist at futures brokerage AxiTrader, said traders were wary of the fact that the market was still holding large amounts of long positions, which will need to be sold off at some stage.

“That makes prices vulnerable to bad news,” he said, pointing to rising Russian production and the likely drop in Saudi physical crude prices.

Money managers raised their bets on a sustained price rise in Brent crude to the highest level on record last week, bringing total long holdings of futures and options to the equivalent of more than 615 million barrels.

“With excessive hedge fund positions still looming over the market, profit taking should weigh on oil prices over the coming weeks,” Julius Baer's Ruecker said.

Brent reached a 2018 high of $71.28 a barrel in January but has since struggled to pass that level. Two rallies last week ran out of steam just above $71.

Saudi Arabia to cut prices

There was also pressure coming from the physical market, where top exporter Saudi Arabia is expected to cut prices for all the crude grades it sells to Asia in May, while output from Russia, the world's largest producer, hit an 11-month high.

Saudi Arabia and Russia have led ongoing efforts by the Organization of the Petroleum Exporting Countries (OPEC) and other major producers outside of OPEC to cut back output to support prices.

The market was also awaiting fuel inventory data due from the American Petroleum Institute later on Tuesday. Crude oil inventories are forecast to rise for a second week, gaining 1.7 million barrels in the week to March 30, according to a Reuters poll on Monday.

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