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Oil prices fall with Wall Street on trade war, give back early gains

[NEW YORK] Oil futures fell on Monday with Wall Street, as the negative turn in the US-Chinese trade talks spooked investors, who had sent oil higher in early trade on concerns about reports of sabotage attacks on tankers in the Middle East that could disrupt supplies.

Brent crude futures for July delivery fell 39 US cents to settle at US$70.23 a barrel. The global benchmark earlier hit a session high of US$72.58 a barrel.

US West Texas Intermediate (WTI) crude futures fell 62 cents to settle at US$61.04 a barrel, after previously hitting US$63.33 a barrel.

Oil was pressured by a slump in stocks and other risk assets as investors moved into safe havens like Treasury bonds in response to the intensifying US-China trade war.

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China defied a warning from US President Donald Trump and moved to impose higher tariffs on a range of US goods including frozen vegetables and liquefied natural gas. The action was widely expected after Washington last week raised tariffs on US$200 billion in Chinese imports.

Investors fear the trade war between the world's two largest economies could escalate further and derail the global economy.

"The significant sell-off in the equity market has dragged crude oil down with it," said Andrew Lipow, president of Lipow Oil Associates in Houston. "However, crude oil would have been far lower had it not been for the sabotage impacting tankers in the Middle East."

Oil prices earlier had risen more than US$1 a barrel after Saudi Arabia said two Saudi oil tankers were among vessels attacked off the coast of the United Arab Emirates (UAE). It was unclear how the attacks occurred.

On Sunday, the UAE said four commercial vessels were attacked near Fujairah, one of the world's largest bunkering hubs. The port lies near the Strait of Hormuz, a vital oil export waterway.

Iran's foreign ministry described the incidents as "worrisome and dreadful" and called for an investigation.

The US Energy Department said on Monday, after the sabotage of the four vessels, it is confident that global oil markets are well supplied.

Saudi Arabia is the largest producer in the Organization of the Petroleum Exporting Countries (Opec) and the UAE is third.

The US Maritime Administration said in an advisory on Sunday that the incidents off Fujairah, one of seven emirates in the UAE, had not been confirmed and urged caution.

Oil prices have risen around 30 per cent this year, supported by supply concerns as the United States imposed sanctions on Iran and Venezuela.

Washington reimposed oil sanctions on Iran in November after pulling out of a 2015 nuclear accord between Tehran and world powers. Iran insists on exporting at least 1.5 million barrels per day (bpd) of oil, triple May's expected levels under US sanctions, as a condition for staying in an international nuclear deal, sources with knowledge of Iran-EU talks said.

Meanwhile, US oil output from seven major shale formations is expected to rise by about 83,000 bpd in June to a fresh peak of about 8.49 million bpd, the US Energy Information Administration said in its monthly drilling productivity report on Monday.

REUTERS