UPDATE 8-Oil falls to 2-mth lows on small U.S. crude stock draw, trade war worries

* U.S. crude stocks fall just 300,000 bbls from 2017 highs -
EIA
* Expectations were for 900,000-barrel fall -Reuters poll
* Full-blown trade war could halve oil demand growth
-Bernstein
* Iran oil exports drop to 400,000 bpd: https://tmsnrt.rs/2WcmvYt

(Adds closing prices)
By Scott DiSavino
NEW YORK, May 30 (Reuters) - Oil prices fell almost 4% to
their lowest in over two months on a smaller-than-expected
decline in U.S. crude inventories and fears of a global economic
slowdown due to the U.S.-China trade war.
The Energy Information Administration (EIA) said U.S. crude
stockpiles fell nearly 300,000 barrels last week, less than the
900,000-barrel decline analysts forecast in a Reuters poll and
well below the 5.3 million-barrel drawdown the American
Petroleum Institute (API) reported late Wednesday. API/S
EIA/S ENERGYUSA ENERGYAPI
The decline last week reduced crude stocks from their
highest since July 2017 seen the previous week, but at 476.5
million barrels, they were still about 5% above the five-year
average for this time of year. "The oil inventories report has added to the bearish
sentiment prevailing in today's trading session," said Abhishek
Kumar, head of analytics at Interfax Energy in London, noting
"Demand-side concerns emerging from the ongoing U.S.-China trade
war are expected to remain the key driver weighing on oil
prices."
Brent futures LCOc1 fell $2.58, or 3.7%, to settle at
$66.87 a barrel, while U.S. West Texas Intermediate (WTI) crude
CLc1 dropped $2.22, or 3.8%, to close at $56.59.
Those were the lowest closes for Brent since March 12 and
WTI since March 8.
For the month, Brent is on track to fall about 8% and WTI
around 11%, which would be the first monthly decline for both
contracts in five months.
The premium of Brent over WTI WTCLc1-LCOc1 , meanwhile,
fell to around $10 per barrel, down from a more than four-year
high of $11.59 on Wednesday.
"An escalating U.S.-China trade war represents a risk to oil
markets," Bernstein Energy said in a note.
A senior Chinese diplomat compared trade actions from
Washington to "naked economic terrorism." Bernstein Energy said under "a full-blown trade war
scenario," global oil demand would grow by just 0.7% this year,
half of current estimates.
Because of weakening demand, Bernstein said any upside for
oil markets was capped despite relatively tight supply.
Oil prices have been supported this year by output cuts from
the Organization of the Petroleum Exporting Countries and other
major producers, as well as by falling supplies from OPEC
members Iran and Venezuela due to U.S. sanctions.
Iranian May crude exports dropped to less than half of April
levels at around 400,000 barrels per day (bpd) after the United
States tightened sanctions on Tehran's main source of income.
Iran needs to export at least 1.5-2.0 million bpd
of crude to balance its books.
"We see an abundance of escalation risks in large part
because the U.S. sanctions are subjecting Iran to almost
unprecedented economic pain," said Helima Croft, managing
director of RBC Capital Markets.
Arab leaders gather in Saudi Arabia on Thursday for
emergency summits that Riyadh hopes will deliver a strong
message to Iran that regional powers will defend their interests
against any threat following attacks on Gulf oil assets this
month. As Arab leaders gathered in Saudi Arabia, the U.S. Iran
envoy said the United States will respond with military force if
its interests are attacked by Iran. Many analysts also expect OPEC-led supply cuts to be
extended until the end of 2019 as the group wants to prevent oil
prices from falling back to levels seen in late 2018 when Brent
slumped to $50 per barrel. Since OPEC and its allies started withholding supply in
January, oil prices have risen by about 30%. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
GRAPHIC: Iran crude oil shipments https://tmsnrt.rs/2WabNSp
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>