By Jessica Jaganathan SINGAPORE (Reuters) -Oil prices fell on Thursday wiping out early gains as more countries imposed movement restrictions amid a surge in coronavirus cases and as the U.S. dollar firmed, though tension in the Middle East kept prices from falling further. Japan was set on Thursday to expand emergency restrictions to more prefectures, […]
Oil prices reverse early gains on virus concerns
By Jessica Jaganathan
SINGAPORE (Reuters) -Oil prices fell on Thursday wiping out early gains as more countries imposed movement restrictions amid a surge in coronavirus cases and as the U.S. dollar firmed, though tension in the Middle East kept prices from falling further.
Japan was set on Thursday to expand emergency restrictions to more prefectures, while China, the world’s second-largest oil consumer, imposed restrictions in some cities and cancelled flights, threatening fuel demand.
Brent crude oil futures dropped by 39 cents, or 0.6%, to $69.99 a barrel by 0649 GMT, after earlier climbing to a session high of $70.72.
U.S. West Texas Intermediate (WTI) crude futures fell 31 cents, or 0.5%, to $67.84 a barrel. Both benchmarks fell by more than $2 a barrel on Wednesday.
“China is now facing its most challenging COVID-19 crisis since the initial outbreak was brought under control,” analysts from FGE said in a note on Thursday.
“The COVID-19 resurgence and the reimposition of restrictions will have negative repercussions on domestic transport fuel demand in the near term,” they said, adding that FGE expects gasoline demand to average about 80,000 barrels-per-day (bpd) less in August than in July.
Also weighing on prices was a surprise 3.6 million barrel build in U.S. crude stockpiles last week, in data from the U.S. Energy Information Administration (EIA). [EIA/S]
Some analysts, though, pointed to a bigger-than-forecast fall of 5.3 million barrels in gasoline stockpiles, a sign of solid demand supporting the market.
A rising dollar, fuelled by expectations the U.S. Federal Reserve may start tightening policy sooner than previously expected, also weighed on oil prices. A stronger greenback makes oil more expensive for those holding other currencies.
Tensions in the Middle East kept price declines in check.
Israeli aircraft struck what the country’s military said were rocket launch sites in south Lebanon early on Thursday in response to earlier projectile fire towards Israel.
The exchange came after an attack on a tanker off the coast of Oman last Thursday that Israel blamed on Iran. Two crew members, a Briton and a Romanian, were killed. Iran denied any involvement.
The U.S. State Department said on Wednesday it believed Iranians hijacked the Panama-flagged Asphalt Princess tanker in the Gulf of Oman but was not in a position to confirm.
“With tensions brewing amongst Iran and world powers over last week’s drone attack, it seems nuclear deal talks will be lengthy and unlikely to provide imminent sanction relief for Iran,” said Edward Moya, senior analyst at OANDA.
(Editing By Tom Hogue)