By Nicole Jao

NEW YORK (Reuters) -Oil prices fell slightly on Thursday as the possibility of U.S. tariffs being reinstated raised questions about demand ahead of an expected supply boost by major producers. 

Brent crude futures fell 56 cents, or 0.81%, to $68.55 a barrel by 12:46 p.m. EDT (1642 GMT). U.S. West Texas Intermediate crude declined 70 cents, or 1.04%, to $66.75 in trade thinned by the Independence Day holiday.

The 90-day pause on implementation of higher U.S. tariffs ends on July 9, and several large trading partners have yet to clinch trade deals, including the European Union and Japan. Oil traders are worried about the impact on the economy and fuel demand. 

A preliminary trade deal between the U.S. and Vietnam boosted prices on Wednesday, but overall tariff uncertainty looms large. 

Also weighing on prices, OPEC+ is expected to agree to raise output by 411,000 barrels per day at its policy meeting this weekend. Also, a private-sector survey showed service activity in China - the world's biggest oil importer - expanded in June at its slowest pace in nine months as demand weakened and new export orders declined.

A surprise build in U.S. crude inventories also highlighted demand concerns in the world's biggest crude consumer.

The U.S. Energy Information Administration said on Wednesday that domestic crude inventories rose by 3.8 million barrels to 419 million barrels last week. Analysts in a Reuters poll had expected a drawdown of 1.8 million barrels.

U.S. job growth was solid in June while unemployment rates fell unexpectedly, data showed on Thursday. However, nearly half of the increase in nonfarm payrolls came from the government sector, with private sector gains slowing considerably as industries like manufacturing and retail grappled with the Trump administration's aggressive tariffs on imports.

"Thursday's jobs report was stronger than expected, which shows that the resiliency we have been seeing in the economy over the past several months is still intact. We still expect the Federal Reserve to continue its wait and see approach on interest rates," said David Laut, chief investment officer of Abound Financial.

Both contracts hit one-week highs on Wednesday as oil producer Iran suspended cooperation with the U.N. nuclear watchdog, raising concerns that the lingering dispute over its nuclear programme could again evolve into armed conflict. 

The United States imposed new Iran-related sanctions on Thursday as well as sanctions targeting the Hezbollah network, the Treasury Department website showed.  

"For now, the market's going to take it in stride, because none of these efforts have worked in the past," said John Kilduff, a partner at Again Capital.

(Reporting by Nicole Jao in New York, Ahmad Ghaddar and Robert Harvey in London; Editing by Barbara Lewis, David Gregorio and Daniel Wallis)