Oil falls as concern grows over Chinese refinery demand

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Also weighing on prices, the U.S. Energy Information Administration reported that crude inventories fell just 1.4 million barrels in the latest week, less than half the 3.3 million barrel draw analysts had expected.

Markets also anticipated an announcement from Washington later on Monday on renewed US sanctions against major oil exporter Iran. The move came in response to the Trump administration's plan to slap the same tariff on an equal amount of Chinese imports in the coming weeks.

The U.S. government is pushing countries to cut Iranian oil imports to zero, but major customers such as China and India are expected to find ways to continue deals despite the sanctions.

"Of course, such decisions being taken by the US side are absolutely unfriendly and can hardly be associated with the. constructive atmosphere achieved at the latest meeting of the two presidents", he was quoted by Russian news agency Tass as saying.

Oil prices held losses near a seven-week low as China vowed to retaliate against the U.S. administration's latest tariffs, raising trade tensions between the world's two biggest economies. Following the announcement by EIA, the WTI lost 2.78 percent to 67.25 us dollars, while Brent decreased 2.55 percent to 72.75 dollars.

West Texas Intermediate crude for September delivery traded at $66.99 a barrel on the New York Mercantile Exchange, up 5 cents, at 7.50am in London.

ANALYST'S TAKE: "Looking at the rhetorical battle between the United States and China recently, it may appear that finding a clue to resolve (the trade war) is impossible", said Lee Seunghoon, an analyst at Meritz Securities Co.in Seoul, South Korea.

Oil prices dropped nearly 4 per cent yesterday amid deepening concerns over the US-China trade war and continued signs of a slowdown in Chinese energy demand.

The Foreign Ministry of China stated on Wednesday that China vehemently opposes the unilateral sanctions from the USA on Iran. China, however, removed crude oil from the list of products up for tariffs beginning on August 23. A weekly report by the Energy Information Administration, scheduled to be released at 10:30 a.m. ET, is expected to show a drawdown in United States inventories.

Iranian oil production fell to 3.72 million b/d in July - the lowest since January 2017, according to Platts estimates. The sanctions did not include Iran's oil exports.

International Olympic Committee and other state firms like Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) enter into annual term import deals with national oil companies of mostly Middle East countries.

The sanctions are already brewing a potential confrontation between the USA and Iran as Tehran has threatened to block the Strait of Hormuz, an important sea route through which tankers ship more than 30 per cent of crude oil to the global market, in retaliation to the sanctions.

Alhajji said "The July production numbers show a large increase in OPEC production close to 300,000 barrels per day, but exports increased only slightly, preventing prices from declining further".

An unexpected 200,000 barrel per day (bpd) drop in oil output in July for Saudi Arabia caused crude futures to rise on Monday - and was accompanied by a wave of renewed fears that prices will spiral upward due to geopolitical tensions.