Oil prices dipped on Friday amid concerns the trade war between the United States and China could intensify, although looming US sanctions against Iran's oil exports prevented markets from falling further.

International Brent crude oil futures were at $77.70 per barrel at 0232 GMT, down 7 cents from their last close. US West Texas Intermediate (WTI) crude futures were down 3 cents at $70.22 a barrel.

Still, with Venezuelan supply falling sharply and concerns around US sanctions against Iran that will target its oil exports from November, crude markets in August are on track to post a more than 4 per cent rise for Brent and a 2 per cent increase for WTI.

In a sign of a tightening market, the amount of unsold crude stored in the Atlantic basin has dwindled from around 30 cargoes to just a handful in recent weeks, trade data showed. Despite this, analysts cautioned that the trade disputes between the United States and other major economies, especially China and the European Union, could start to drag on economic growth and, by extension, fuel demand.

“You have to wonder if it (crude) can sustain these prices in a world where President Trump doubles down on his battle with the EU and China at the same time,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

US President Donald Trump is reportedly planning to ramp up trade conflict with China and has told aides he is ready to impose tariffs on $200 billion more in Chinese imports as soon as a public comment period on the plan ends next week, several media reported on Thursday. “Assuming the trade war is about to escalate again, the questions traders will be wondering about is global growth (and) demand for crude,” McKenna said.

Shanghai delivery

Meanwhile, China's Shanghai crude oil futures, launched in March, will see delivery of their first contract on Friday. The speed of Shanghai crude's take-up has surprised many traders and analysts.

Among the three major crude benchmarks—WTI, Brent and Shanghai—China's front-month crude futures now make up a share of almost 15 per cent in terms of monthly volumes.

Traders said Shanghai's fast rise reflects China's importance as the world's biggest oil importer. It is also part of a policy by Beijing to increasingly use the yuan currency in global trade, especially during times of economic disputes with the United States. Since its launch in March, front-month Shanghai crude oil futures have gained almost 10 per cent in value to 481 yuan ($70.31) per barrel.

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