Oil prices dropped as escalating trade war between the US and China renewed concerns of economic slowdown, which in turn may dampen crude demand.

Brent crude futures LCOc1 slipped 73 cents to $61.16 a barrel, while US West Texas Intermediate (WTI) crude futures CLc1 dropped 62 cents to trade at $55.04 per barrel, reported Reuters. Brent dropped 2.5% last week while the US crude slipped 1% over ongoing trade frictions.

Last week, US President Donald Trump announced a fresh 10% tariff on $300bn of Chinese imports from 1 September further intensifying the trade tensions between the two largest economies. The move puts tariffs on nearly all Chinese products that the US imports from the Asian country.

Phillip Futures commodities analyst Benjamin Lu was quoted by Reuters as saying: “Crude oil futures experienced significant headwinds as global risk appetites remain feeble over subdued global growth and a sudden escalation in the Sino-US trade dispute.”

As a result of the trade impasse, China allowed its currency to drop below the beyond the 7-per-dollar level for the first time in a decade, to counter the US tariffs. However, the move will further raise the cost China’s US Dollar-denominated oil imports.

On the other hand, signs of rising US oil exports further added pressure on crude prices. According to the US Census Bureau, crude shipments increased by 260,000 barrels per day (bpd) in July to a monthly record of 3.16Mbpd.

At the same time, the weekly oil rig count in the US dropped for a consecutive fifth week.