The market, however, found support on Friday from supply concerns. "We coordinated - we discussed USA oil sanctions to deny Iran revenue to finance terrorism".
Brent crude LCOc1 rose $1.23, or 1.7 percent, to $74.63 a barrel by 0544 GMT after slumping 6.9 percent on Wednesday. Total volume traded was about 33 percent above the 100-day average.
If China follows through with its threat to slap tariffs on USA oil imports, it would put downward pressure on the WTI Crude benchmark and widen its discount to Brent Crude, which could be make US oil even more attractive to Indian buyers, according to Fielden.
"The headline on Libya was merely the trigger", said John Saucer, a vice president at advisory firm Mobius Risk Group.
If proposed US tariffs on Chinese goods go into effect, duties will cover almost half of all American imports from the Asian nation. Yesterday, we wrote that a strike in a Shell-operated oil field in Norway helped drive Brent crude oil prices higher.
Oil prices fell along with stock markets and other commodities after the Trump administration threatened tariffs on another $200 billion in Chinese goods.
"For WTI there is tightness at Cushing, which will be supportive over July and August", said Virendra Chauhan, oil analyst at Energy Aspects in Singapore.
A decision on what to do about imports from Iran by China and India, who together bought about 1.4 million barrels a day of Iranian crude over the past three months, will probably have a larger impact on the broader oil market.
May and Trump will have positive trade discussion: United Kingdom finance minister Hammond
Such a resolution would avoid disruption to automakers and other manufacturers that source parts from multiple countries. The UK will maintain a "common rulebook" for all goods traded with the European Union , including agricultural products.
"Markets in Asia are a lot more settled today", said Greg McKenna, chief market strategist at AxiTrader in Sydney. Still, there is concern that doing so will use up global spare capacity and leave markets vulnerable to further or unexpected production declines.
China was the world's biggest oil importer past year, followed by the US.
The price fall was aided by news Tripoli-based National Oil Corp (NOC) had lifted a force majeure on four Libyan oil ports, saying production and exports from the terminals would "return to normal levels in the next few hours".
Adding to the Bearish mood were signs of a possible relaxation of U.S. sanctions on Iranian Crude Oil exports.
The bearish mood was also fueled by news the United States would consider requests for waivers from sanctions due to snap back into place on Iranian crude exports.
India began regular US imports a year ago, but the volumes are now small, especially compared to the USA crude exports to China, EIA data shows.
Due to higher US oil production, however, higher prices are not necessarily a net loss for the USA economy. This will bring additional crude to the market.