NEW YORK (Reuters) - Oil slumped over 3% on Friday and posted its biggest monthly drop in six months, after U.S. President Donald Trump stoked global trade tensions by threatening tariffs on Mexico, a key U.S. trade partner and major supplier of crude oil.

FILE PHOTO: Pumpjacks are seen against the setting sun at the Daqing oil field in Heilongjiang province, China December 7, 2018. REUTERS/Stringer

Brent crude futures fell $2.38, or 3.6%, to settle at $64.49 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell $3.09 to $53.50 a barrel, a 5.5% loss.

Brent touched a session low of $64.37 a barrel, lowest since March 8. WTI hit $53.41 a barrel, weakest since Feb. 14.

Brent futures posted an 11% slide in May and WTI a 16% drop, their biggest monthly losses since November.

(Graphic: Oil prices monthly changes link: tmsnrt.rs/2WujIcF)

Trump vowed on Thursday to ratchet up tariffs unless Mexico stopped people from illegally crossing into the United States. The plan would impose a 5% tariff on Mexican imports starting on June 10 and increase monthly, up to 25% on Oct. 1.

That could hit the lucrative cross-border energy trade.

“U.S. refiners import roughly 680,000 barrels per day of Mexican crude. The 5% tariff adds an extra $2 million to the cost of their daily purchases,” PVM analysts said.

The United States also exports more fuels to Mexico than any other country, according to the U.S. Energy Department. So far Mexico has not said whether it would retaliate.

Mexican President Andres Manuel Lopez Obrador on Friday urged Trump to back down from the threats.

Investors were already worried that the U.S.-China trade war increased the danger of a recession.

Additional levies by Beijing on the majority of U.S. imports on a $60 billion target list are due to take effect on Saturday, in response to Washington’s move this month to slap further tariffs of up to 25% on $200 billion of Chinese goods.

A Reuters survey showed Brent crude prices are likely to hold near $70 a barrel for the rest of the year as elevated supply risks in the Middle East offset risks to demand.

(GRAPHIC: U.S. oil drilling, production & storage levels link: tmsnrt.rs/2DxgF8W)

Top oil exporter Saudi Arabia’s increased output in May was not enough to compensate for lower Iranian exports, a Reuters survey found. The Organization of the Petroleum Exporting Countries is expected to meet in late June. At the beginning of the year, OPEC and allies agreed to cut production by 1.2 million bpd.

U.S. production has offset that decline, as output returned to a record 12.3 million barrels per day, and as U.S. crude stocks fell less than expected last week, according to weekly figures.

“This fresh tariff headline offers a ‘pile on’ effect to an oil market that has already been seeing downside pressure from some unexpectedly large U.S. crude supply increases that have been weighing on values across this month of May,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

U.S. energy firms increased the number of oil rigs operating for the first week in four, adding three oil rigs, General Electric Co’s Baker Hughes energy services firm said. But in May the rig count was reduced for the sixth straight month.

Hedge funds and other money managers cut combined futures and options position in New York and London in the week to May 28 by 38,030 contracts to 212,080, the U.S. Commodity Futures Trading Commission (CFTC) said.