Oil prices drop as U.S.-China trade war fuels growth concerns

Tensions in the Middle East offered some support to prices, with Iran seizing a tanker that it said was smuggling fuel.

Brent crude LCOc1 was down 50 cents, or 0.8%, at $61.39 a barrel by 0029 GMT.

U.S. crude CLc1 was down 24 cents, or 0.4%, at $55.42 a barrel.

Both of the benchmarks fell last week, with Brent dropping more than 2% and U.S. crude ending the week around 1% lower.

“Oil demand has disappointed ... in 2019 due to weaker economic activities, unfavorable weather and trade tensions,” Goldman Sachs said in a research report.

Trump last week he would impose a 10% tariff on $300 billion of Chinese imports and said he could raise duties further if China’s president, Xi Jinping, failed to move more quickly towards a trade deal.

The announcement extends U.S. tariffs to nearly all imported Chinese products. China on Friday vowed to fight back against Trump’s decision, a move that ended a month-long trade truce.

The trade war has been hitting economic growth, which tends to reduce demand for commodities such as oil.

U.S. crude oil exports surged by 260,000 barrels per day (bpd) in June to a monthly record of 3.16 million bpd, suggesting there is plenty of oil in the market. South Korea bought record volumes and China resumed purchases, data from the U.S. Census Bureau showed.

Also in the U.S., the weekly oil rig count, an indicator of future production, fell for a fifth week in a row as most independent producers cut spending even though majors were still pushing ahead with investments in new drilling.

In the Middle East, Iranian Revolutionary Guards seized an Iraqi oil tanker in the Persian Gulf, which they said was smuggling fuel, Iran’s state media reported on Sunday, in a show of power amid heightened tensions with the West.

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