NEW YORK (Bloomberg) - Oil fell for a second day as the U.S.-China trade war escalated against the backdrop of swelling American crude inventories.

Futures fell as much as 2.6% in New York on Thursday. In the latest salvo of the dispute between the world’s biggest economies, the Chinese government said it “has no choice but to take necessary measures to retaliate” against new planned U.S. tariffs on billions of dollars in products. Meanwhile, U.S. oil stockpiles have expanded by about 4 million barrels during the past two weeks, halting almost two months of storage withdrawals.

U.S. crude stockpiles rose by 1.58 million barrels last week

China’s threat to retaliate followed U.S. President Donald Trump’s decision to postpone new levies on $300 billion in Chinese goods. Oil has fallen almost 7% this month as the trade war darkened the global economic outlook and ample crude production from American fields remained near a record. Investors are fleeing risky assets such as oil and seeking shelter in U.S. government debt, gold and the Japanese yen.

Concerns about “global slowdowns” are growing, said Mark L. Waggoner, president at commodity brokerage Excel Futures.

West Texas Intermediate crude for September delivery slipped 53 cents to $54.70 a barrel at 11:31 a.m. on the New York Mercantile Exchange.

Brent for October settlement declined $1.20 to $58.28 on the ICE Futures Europe Exchange. The global benchmark traded at a $3.67 premium to WTI for the same month.

U.S. stockpiles rose by 1.58 MMbbl last week, confounding analysts who forecast a decline. The increase was especially bearish as it happened during the peak U.S. summer driving season, when demand for motor fuels typically surges.