Seoul: Oil prices held losses near a seven-week low as China vowed to retaliate against the US administration’s latest tariffs, raising trade tensions between the world’s two biggest economies. Futures in New York were little changed after sliding 3.2% on Wednesday.

China will slap 25% duties on an additional $16 billion worth of imports from the US from 23 August, including gasoline, diesel and other petroleum products. Investor concern that the trade spat will limit energy demand growth overshadowed Energy Information Administration data released Wednesday that showed US crude inventories fell the second time in three weeks.

Crude has struggled to gain near $70 this month after retreating from the highs of June as the US and China showed no sign of backing down from the trade fight, raising concerns over global economic growth. Meanwhile, investors are closely watching whether Saudi Arabia and other producers will increase output to replace potential supply losses from Iran as President Donald Trump is set to impose sanctions on the country’s oil exports from November.

“Oil had been largely immune from the escalating trade dispute, however the recent application of tariffs by China on US petroleum products does represent a step change for the energy market," said Daniel Hynes, a Sydney-based analyst at Australia & New Zealand Banking Group Ltd. “It’s clearly worrying investors at the moment."

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. The contract declined $2.23 to $66.94 on Wednesday, the lowest close since 21 June. Total volume traded was about 33% below the 100-day average.

Brent for October settlement traded at $72.44 a barrel on the London-based ICE Futures Europe exchange. Prices dropped $2.37 to settle at $72.28 on Wednesday. The global benchmark crude traded at a $6.08 premium to WTI for the same month.

Futures for September delivery lost 1.1% to 517.7 yuan a barrel on the Shanghai International Energy Exchange, after falling 2.6% on Wednesday.

With its latest tariff threat, China on Wednesday matched an earlier move from Washington in another ratchet higher for the trade war between the two nations. The Ministry of Commerce said the US decision to levy tariffs on Chinese goods is “very unreasonable," and the Asian nation will have to retaliate to protect its rightful interests and the multilateral trading system.

Oil from American fields was among goods the Chinese had designated as subject to eventual tariffs on a list in June. But the commodity was spared from the 11-page series of 333 product classifications that will incur levies released Wednesday. While crude hasn’t been targeted this time, the Asian nation may reimpose duties at a later date if Trump doesn’t back down, according to Li Li, a research director at ICIS-China.

As recently as June, China was the top foreign buyer of US crude, importing a record 15 million barrels that month. A the same time, President Xi Jinping is urging China’s state-owned energy giants to boost domestic oil and gas output. Refiners in China are unlikely to increase purchases of American crude even after the Ministry of Commerce removed oil from its list of US goods slated for tariffs, according to Michal Meidan, an analyst with Energy Aspects Ltd.

In the US, nationwide crude stockpiles dropped 1.35 million barrels last week, according to the EIA, while supplies stored in the key hub of Cushing, Oklahoma, slid for a twelfth straight week, declining by 590,000 barrels. Gasoline inventories increased by 2.9 million barrels, the data show.

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