Oil dips in nervous markets with U.S., China on brink of trade war

By Henning Gloystein

SINGAPORE (Reuters) - Oil prices dipped on Friday as markets grew more nervous ahead of a raft of import tariffs set to be imposed later in the day by the world's two biggest economies, the United States and China, threatening global growth.

Brent crude futures fell 28 cents, or 0.4 percent, to $77.11 per barrel by 0214 GMT from their last close.

U.S. West Texas Intermediate (WTI) crude futures were down 14 cents, or 0.2 percent, at $72.80.

Weighing on prices was a rise in U.S. crude inventories of 1.2 million barrels in the week to June 29, to 417.88 million barrels, according to the U.S. Energy Administration (EIA) on Thursday.

Looming larger over markets is the escalating U.S./China trade dispute.

The United States has announced the introduction of tariffs on Chinese goods from 12:01 a.m. Washington D.C. time (0401 GMT) on Friday.

China says it will immediately retaliate, and U.S. President Trump said on Thursday he may ultimately impose tariffs on more than a half-trillion dollars worth of Chinese goods.

"We're headed for an unparalleled trade conflict between the world's largest economies," said Stephen Innes, head of trading for Asia/Pacific at brokerage OANDA.

"With so much uncertainty hanging in the balance, trading was very quiet," he added.

Beijing has threatened a 25 percent tariff on U.S. crude imports, although it has not specified a date.

American crude shipments to China currently stand around 400,000 barrels per day (bpd), worth $1 billion a month at current prices.

TARIFFS, SANCTIONS, DISRUPTIONS

Import duties would make U.S. oil uncompetitive in China, forcing its refiners to seek alternative supplies in a tight market.

Energy consultancy FGE on Friday issued a stark warning of looming supply shortages due to U.S. sanctions against Iran, and because of disruptions elsewhere.

"Iran's exports are some 2.7 million bpd, including condensate," it noted.

Even if the U.S. government grants some waivers to allies, FGE estimated 1.7 to 2 million bpd of crude and condensate would be cut out of markets once its sanctions are implemented.

Some are already reacting. South Korea, a major buyer of Iranian oil and condensate, will not lift any Iranian oil in July for the first time since August 2012, three sources familiar with the matter said on Friday.

Cutting Iran out from oil trading comes amid other disruptions.

"Venezuela...will lose another 400,000 bpd by year-end with production going to below 1 million bpd," FGE said, adding that another 300,000 bpd of Libyan capacity was disrupted.

Although Saudi Arabia and Russia have said they would raise output to make up for disruptions, FGE said "there simply is not enough capacity to make up for Iran's crude losses, plus Venezuela and Libya", and warned of the possibility of oil prices rising to $100 per barrel.

(Reporting by Henning Gloystein; editing by Richard Pullin)