Oil prices have dropped around 1% on the back of sharp sell-offs in global markets caused by escalating trade tensions between the US and China.
Brent crude futures went down by 65 cents, or 0.9%, to reach $74.69 a barrel, while US West Texas Intermediate (WTI) crude futures declined by 61 cents, or 0.9%, to trade at $65.24, Reuters reported.
The US triggered a trade war with several countries, including China, making its intentions clear to impose duties on imports.
The government is set to impose tariffs on $50bn of Chinese imports, starting on 6 July.
This has further heated up the tensions, with China threatening to retaliate with tariffs on products imported from the US, including a 25% duty on US crude oil imports.
China has become a major customer of US crude, with imports valued at around $1bn per month.
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Energy oil consultancy Trifecta director Sukrit Vijayakar was quoted by the news agency as saying: “The tariff war between the US and China is showing signs of escalating.
“China recently hinted that it may levy tariffs on (US) crude imports as well. This could make a huge dent in the US bid to export oil.”
According to energy consultancy Wood Mackenzie, the US would be hit by the trade war as it ‘would find it hard to find an alternative market that is as big as China’ as the Asian nation buys around 20% of all US crude exports.
Another factor responsible for the fall in prices is expectations of an increase in production by the Organization of the Petroleum Exporting Countries (OPEC) and key ally Russia.
A meeting is scheduled to be held later this week between OPEC and Russia to discuss future production policy.