Oil tumbles on slowing Chinese demand, U.S.-China trade spat

By Stephanie Kelly

NEW YORK (Reuters) - Oil prices slid almost 4 percent on Wednesday as a trade dispute between the United States and China escalated further and after Chinese import data showed a slowdown in energy demand.

Brent crude (LCOc1) futures fell $2.73 to $71.92 a barrel, a 3.7 percent loss, by 12:33 p.m. EDT (1633 GMT).

U.S. West Texas Intermediate (WTI) crude (CLc1) futures fell $2.70 to $66.47 a barrel, a 3.9 percent loss. The session low of $66.32 was the lowest since June 22.

China is slapping additional tariffs of 25 percent on $16 billion worth of U.S. imports, from fuel and steel products to autos and medical equipment.

The escalating trade war has rattled global markets. Investors fear a potential slowdown of the world's two largest economies would slash demand for commodities.

"The U.S.-China trade war is set to worsen, and its impact on oil prices will be gradual as the situation develops," said Abhishek Kumar, senior energy analyst at Interfax Energy in London. "Crude oil and refined products affected by additional duties will reduce their competitiveness in the Chinese market."

China's crude imports recovered slightly in July after two straight monthly declines, but remained low due to a dropoff in demand from smaller independent refineries.

Shipments into the world's biggest importer of crude came in at 36.02 million tonnes last month, up to 8.48 million barrels per day from 8.18 million bpd a year earlier and June's 8.36 million bpd, customs data showed.

Also weighing on prices, the U.S. Energy Information Administration reported that crude inventories fell just 1.4 million barrels in the latest week, less than half the 3.3 million barrel draw analysts had expected.

Gasoline stocks notched a surprise rise of 2.9 million barrels, not the 1.7 million barrel drop analysts had predicted in a Reuters poll.

"Gasoline demand has been one of the main bullish stories in the oil market and if that demand is slipping off a little bit, maybe we're seeing reluctance to higher prices," said Phil Flynn, an analyst at Price Futures Group in Chicago.

Prices drew some support from U.S. sanctions against Iran, introduced Tuesday in a range of sectors. From November, Washington will target the petroleum sector in Iran, the No. 3 producer in the Organization of the Petroleum Exporting Countries.

An Iranian newspaper reported that Foreign Minister Mohammad Javad Zarif said a U.S. plan to reduce Iran's oil exports to zero will not succeed.

Shipped Iran crude oil exports: https://reut.rs/2vjGcyb