Brent and WTI crude oil futures dipped on Monday as concerns of a looming trade dispute between the United States and China weighed on global markets.
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In Asia, Shanghai crude oil futures debuted strongly, both in terms of volume and prices, with front-month contracts soaring as much as 6 percent as investors bought into the world's newest financial oil trading instrument.
Looming over oil markets, however, was the possibility of a full-blown trade war between the United States and China battered Asian shares on Monday. The falls came after U.S. President Donald Trump last week signed a memorandum that could impose tariffs on up to $60 billion of imports from China.
This weighed on crude oil futures as well. U.S. West Texas Intermediate (WTI) crude futures were at $65.49 a barrel at 0543 GMT, down 39 cents, or 0.6 percent, from their previous close.
Brent crude futures were at $70.18 per barrel, down 27 cents, or 0.4 percent.
Crude was also weighed by a rise in the number of U.S. rigs drilling for oil to a three-year high of 804, implying further rises in production, which has already jumped by a quarter since mid-2016 to 10.4 million barrels per day (bpd).
Financial oil markets have long been dominated by Europe's Brent and America's WTI.
Asia, despite being the world's biggest and fastest growing oil consumer, has so far not had a benchmark.
That possibly changed on Monday, as China saw the launch of Shanghai crude oil futures.
Few analysts doubt that Asia is overdue a financial oil price benchmark, and that China with its vast consumer and production base is a prime location for it.
"China surpassed the U.S. to become the world's largest importer of crude in 2017. Rightly so, China would want to play a more active role in influencing the price of crude oil," said Sushant Gupta, research director at energy consultancy Wood Mackenzie.
Wood Mackenzie said it expected China's crude imports to grow by 2.1 million bpd from 2017 to 2023, which it said was the world's biggest growth in demand.
"Prices assessed at the Shanghai exchange will reflect China's crude supply and demand," said Gupta, adding that its independence from movements in Brent and WTI "could provide new arbitrage opportunities for traders."
Despite this, there were concerns over regulatory interference, as seen in other Chinese commodities like iron ore and coal.
"The fact that the government is encouraging the exchange and also is not shy about stepping in to occasionally change the rules may discourage international players," said Jeff Brown, President of energy consultancy FGE.
That concern did not scare off global commodity trading giant Glencore, which according to Chinese brokerage Xinhu Futures carried out the first trade on the Shanghai crude oil futures.
(Reporting by Henning Gloystein Editing by Kenneth Maxwell)