Oil prices fell on Monday over fresh concerns of weaker crude demand after U.S. President Donald Trump said he would impose tariffs on more Chinese imports, potentially ramping up a trade war between the world’s two largest economies.
Tensions in the Middle East offered some support to prices, with Iran seizing a tanker that it said was smuggling fuel.
Brent crude was down 50 cents, or 0.8 per cent at $61.39 a barrel, while U.S. crude was down 24 cents, or 0.4 per cent, at $55.42 a barrel.
Both of the benchmarks fell last week, with Brent dropping more than 2 per cent and U.S. crude ending the week around 1 per cent lower.
“Oil demand has disappointed in 2019 due to weaker economic activities, unfavourable weather and trade tensions,” Goldman Sachs said in a research report.
Trump last week he would impose a 10 per cent 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 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.