Oil prices fall 2% as US-China trade war concerns hit demand outlook

Global oil benchmark Brent futures fell more than 2 per cent on Monday on global growth concerns after US President Donald Trump last week threatened China with more tariffs, which could limit crude demand from the world's two biggest buyers.

Brent crude fell $1.38, or 2.2 per cent, to $60.51 a barrel by 12:49 p.m. EDT (1649 GMT).

US West Texas Intermediate (WTI) crude futures fell 28 cents, or 0.5 per cent, to $55.38 a barrel, finding some support from a draw in inventories at the Cushing, Oklahoma, storage hub and delivery hub for WTI.

Stocks at Cushing fell nearly 2.4 million barrels in the week to Aug. 2, traders said citing data from market intelligence firm Genscape. The front-month WTI contract traded at a premium of 12 cents to the second-month, the highest since April.

"The escalation in the US-China trade is another negative for the oil demand outlook, as the fallout from the spat continues to greatly impact the Asian economic region, which is key to the oil demand outlook," said John Kilduff, partner at Again Capital Management.

Both crude benchmarks plummeted by more than 7 per cent last Thursday to their lowest level in about seven weeks after Trump's announcement, before recovering somewhat to leave Brent down 2.5 per cent on the week and US crude 1 per cent lower.

Trade war worries hit global equities again on Monday, while stoking a rally in safe-haven assets including the Japanese yen, core government bonds and gold.

Trump last week said he would impose a 10 per cent tariff on $300 billion of Chinese imports starting on Sept. 1 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 US 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.

On Monday, China let the yuan tumble beyond the 7-per-dollar level for the first time in more than a decade.

A lower yuan raises the cost of dollar-denominated oil imports in China, the world's biggest crude oil importer.

Signs of rising oil exports from the United States also pressured prices on Monday. US shipments surged by 260,000 barrels per day (bpd) in June to a monthly record of 3.16 million bpd, US Census Bureau data showed on Friday.

Lending some support to prices, Iran's seizure of an Iraqi oil tanker raised concerns about potential Middle East supply disruptions in the Gulf.

Iran will no longer tolerate "maritime offences" in the Strait of Hormuz, its foreign minister said on Monday.