US-China trade war: Oil drops as slower global economic growth expected

Oil prices fell on Friday after a Reuters poll showed global economic growth is likely to slow further amid the US-China trade war, although losses were limited by tensions in the Middle East. Brent crude futures were down 24 cents, or 0.4%, at $63.15 a barrel by 0049 GMT. They rose 0.3% in the previous session. US West Texas Intermediate crude was down 5 cents, or 0.1%, at $55.97 a barrel, after gaining 0.25% overnight.

A global economic growth rut risks deepening, despite expectations that major central banks will cut rates or ease policy further, according to Reuters polls of over 500 economists who remain worried about the U.S.-China trade war. 

Increasing pessimism is clear from the latest polls taken July 1-24, which show the growth outlook for nearly 90% of over 45 economies polled was either downgraded or left unchanged. That applied not just to this year but also 2020.

While concerns over Middle East supply disrputions have led to recent price spikes, oil has generally been under pressure from worries about global economic growth amid growing signs of harm from the rumbling Sino-U.S. trade war over the past year.

"Bullish wagers will be held hostage to the soggy global growth outlook," Stephen Innes, managing partner at Vanguard Markets, said in a note.

A week after Iran seized a British-flagged tanker in the Gulf, Britain has sent a warship to accompany all British-flagged vessels through the Strait of Hormuz, a change in policy announced on Thursday after the government previously said it did not have resources to do so.

US Secretary of State Mike Pompeo said in a television interview on Thursday that he would go to Iran for talks if it was necessary, amid the tensions between Tehran and Washington.