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Oil prices suffered steep falls on Wednesday after Libya said it would boost supply, even as investors fear that trade tensions will hit demand.

Brent crude dropped 6.9% - the biggest decline in more than two years - to end at $73.40 a barrel for the global benchmark.

US crude fell 5% to $70.38 a barrel - its worst one-day decline in a year.

The declines followed a months-long rally that had increased prices to some of the highest levels in recent years.

However, oil prices have been volatile in recent weeks after the US said it would reinstate sanctions against Iran, a major producer.

Wednesday's sell-off started after the announcement by Libya's National Oil Corp that it would reopen four export terminals that had been closed since late June, shutting most of the country's oil output.

The falls came despite a US government report that American crude oil stockpiles fell by more than 12 million barrels last week and are about 4% lower than average for this time of year.

OPEC president Suhail Al-Mazrouei said volatility in oil prices was not desirable: "Fluctuation is not good and we do not like to see lots of fluctuation in the prices."

Economists are worried that escalating trade tensions between the US and China will hurt the global economy, lowering demand.

On Tuesday, the US unveiled a list of $200bn worth of products to be hit with 10% tariffs, prompting China to vow counter-measures.

The back-and-forth followed tariffs on $34bn of each country's goods that went into effect last week

While fallout from those measures is expected to be relatively limited, that could change if the fight continues.

China was the world's biggest oil importer last year, followed by the US.