Oil drops below $70 on virus concerns

Oil drops below $70 on virus concerns

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. read more

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).

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, Reuters reported.

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