Oil tanks for third straight week as US-China trade war weakens commodities

Brent has fallen to $70 per barrel after spiking to $75 at the end of April

FILE PHOTO: An offshore oil platform is seen in Huntington Beach, California September 28, 2014. Brent oil prices fell more than $2 a barrel to less than $88 on Monday, its lowest since 2010, after key Middle East producers signalled they would keep output high even if that meant lower prices. Brent oil prices have tanked by nearly 25 percent since June as ample supply coincided with weak demand, raising the possibility that the Organization of the Petroleum Exporting countries could cut output.  Picture taken September 28, 2014. REUTERS/Lucy Nicholson/File Photo
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Oil prices have fallen for the third straight week as fears the US-China trade war escalation threatens global demand with a gloomy outlook for commodities.

Benchmark Brent was trading at $70.62 per barrel on Saturday, while West Texas Intermediate, largely used to track North American crude fell to $61.66 per barrel.

Brent's decline follows an earlier spike to $75 per barrel towards the end of April when the US administration cancelled waivers to Iran's oil buyers effective from May 2 onwards.

The markets had feared further tightening, as supplies remain squeezed due to ongoing output curbs by Opec and allies as well as loss of production from Venezuela and Libya.

President Trump's signalling of a tougher stance on China, the world's largest buyer of oil, with the imposition of tariffs on $200bn of imports from Beijing has rattled the energy markets. The decline in prices suits Mr Trump's agenda with the US driving season and campaigning for the presidential election set to begin soon. The US also imposed sanctions against Iran's metals industry last week, further tightening the noose against the Islamic Republic as well as unsettling the commodities market.

"Trade war concerns have dragged down Brent in recent weeks, while the Brent futures curve is pointing more steeply downward, for immediate delivery crude buyers need to pay a rising premium versus delivery at a later point. The physical market in Europe is scrambling to obtain sufficient barrels," Giovanni Staunovo, commodity analyst with Swiss bank UBS said in a note.

However, the Zurich-based lender maintained its outlook for Brent at $75 per barrel and expected the benchmark to gather momentum on the assumption that Saudi Arabia and allies will only cautiously increase production.

Following the cancellation of waivers, the White House had indicated that the UAE and Saudi Arabia had agreed to undertake "timely action" to replace almost a million barrels of Iranian oil in the markets.

However, the two sovereign producers who will convene with other Opec+ allies later this week in Jeddah to review production curbs, are also assessing the need for boosting supply to avoid the bearish market scenario seen towards the end of 2018.