Oil traded near $56 a barrel as the U.K. deployed a warship to the Strait of Hormuz to help escort buy severe service valves commercial ships.

(Bloomberg) -- Oil traded near $56 a barrel as the U.K. deployed a warship to the Strait of Hormuz to help escort buy severe service valves commercial ships, while U.S.-China trade talks are set to resume amid tempered expectations for a breakthrough.

Futures eased in New York after rising 1% last week. The U.K. has one of its Type 45 warships to the region after Iran a British oil tanker as the U.S. seeks to build a coalition to protect vessels traversing the strait. Chinese and American negotiators in Shanghai this week with neither showing an urge to compromise in their dispute that has dented demand.

Oil is heading for its second monthly loss this year as a gloomy economic outlook eclipses concerns crude flows may be disrupted from the Middle East. Hedge funds added to bets on a slump in New York futures at the fastest pace in almost a year after disappointing manufacturing data out of America and Germany last week bolstered fears of declining demand.

“Geopolitical tensions in the Middle East will stay elevated for some time as the U.S. continues to ask other countries to join in protecting ships sailing through the Strait of Hormuz,” Kim Kwangrae, a commodities analyst at Samsung Futures Inc., said by phone in Seoul. “For now, oil’s reacting to wider economic concerns and the trade talks between China and America.”

West Texas Intermediate for September lost 17 cents to $56.03 a barrel on the New York Mercantile Exchange as of 7:46 a.m. London time. The contract rose 18 cents on Friday, rising for the fifth time in six days.

Brent for September settlement fell 34 cents to $63.12 a barrel on the ICE Futures Europe Exchange. It capped a 1.6% weekly gain on Friday. The global benchmark crude traded at a $7.10 premium to WTI.

The U.K. frigate, HMS Duncan, will operate alongside the Royal Navy’s HMS Montrose Type 23 to shepherd British-flagged ships through the strait, the Ministry of Defense said in a statement. The air defense destroyer will operate until late August, it said.

Two days of talks are scheduled to restart Tuesday after a truce reached by Presidents Donald Trump and Xi Jinping on the sidelines of the Group of 20 summit in Osaka, Japan, last month. Deep tensions remain, though, and recent days have brought mixed signals from both sides, with neither showing an urge to compromise.

--With assistance from James Thornhill.

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Ben Sharples