Oil prices set to drop for second week as US-China trade war to cut demand

(Reuters) - Oil prices fell on Friday and were set to drop for a second week on concerns prolonged trade war between the United States and China, the world's largest economies, will crush crude consumption as their dispute curtails economic growth.

Brent futures fell 31 cents, 0.5 per cent, to $63.02 a barrel by 0153 GMT, while US West Texas Intermediate crude futures lost 36 cents, or 0.6 per cent, to $59.71. Both benchmarks settled over $2 lower on Thursday.

Brent is set to fall 4 per cent this week, adding to an 11 per cent drop in the prior week, while WTI is set to decline 3.8 per cent, after also falling 11 per cent in the previous week.

A prolonged trade dispute between the US and China is likely to reduce global trade volumes and disrupt trade routes, and eventually weigh on global economic growth. As the world's two largest oil consumers, that will also impact crude consumption.

Oil prices have come "under pressure amid ongoing concerns about a global economic slowdown," Daniel Hynes, senior commodity strategist at ANZ, said in a note on Friday. He added the bank forecasts that if global economic growth falls below 3 per cent, oil consumption will decline by 1 per cent.

The trade war between the two economic superpowers has ratcheted up after US President Donald Trump raised tariffs against China to 145 per cent on Thursday, even after announcing a pause on heavy tariffs against dozens of trading partners on Wednesday. China, in turn, has announced an additional import levy on US goods, raising their tariffs to 84 per cent on US goods.

The US Energy Information Administration on Thursday lowered its global economic growth forecasts and warned that tariffs could weigh heavily on oil prices, as it slashed its US and global oil demand forecasts for this year and next.