Oil prices head for the biggest monthly decline in the last six months, triggered by the US announcement to slap tariffs on Mexican goods, which would offset demand.

Brent crude futures were trading at $65.72 per barrel, while US West Texas Intermediate (WTI) crude futures were at $55.85 a barrel, reported Reuters.

Brent futures are heading towards a 10% drop in its prices in May, while the US WTI is poised for a 13% decline. The monthly losses are the biggest since November 2018.

The US President Donald Trump announced a 5% tariff on all Mexican imports in a bid to stop illegal immigration from its southern neighbour. The move adds up to the worries on the ongoing trade war between the US and China, which many analysts fear may cause an economic slowdown.

PVM was quoted by Reuters as saying in a note: “The mood is now definitely risk-off, and this is putting oil under pressure for the time being.

“US refiners import roughly 680,000 barrels per day of Mexican crude. The 5% tariff adds an extra $2m to the cost of their daily purchases.”

Oil prices are also under pressure due to a below-expectation fall in US crude stockpiles. According to the US Energy Information Administration (EIA), crude stocks in the country dropped by 300,000 barrels to 476.49 million barrels last week, against an anticipated 5.3 million-barrel decline. Oil production in the US also touched a record 12.3 million barrels per day.

On the other hand, a Reuters survey found that the Saudi Arabia’s increased output in May was not enough to substitute falling Iranian exports.