Oil prices reverse early gains on virus concerns

An oil pump jack of Canadian group Vermilion Energy is pictured in Parentis-en-Born, France, October 13, 2017. (Reuters)

SULAIMANI (ESTA) — Oil prices fell on Thursday wiping out early gains as more countries imposed movement restrictions amid a surge in coronavirus cases and the U.S. dollar firmed.

Brent crude oil futures dropped by 06 cents to $70.32 a barrel by 0732 GMT. U.S. West Texas Intermediate (WTI) crude futures fell 3 cents to $68.12 per barrel.

Both benchmarks fell by more than $2 a barrel on Wednesday.

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.

“China is now facing its most challenging COVID-19 crisis since the initial outbreak was brought under control,” Reuters quoted analysts from FGE as saying.

“The COVID-19 resurgence and the reimposition of restrictions will have negative repercussions on domestic transport fuel demand in the near term,” they said.

Analysts added that FGE expects gasoline demand to average about 80,000 barrels-per-day (bpd) less in August than in July, according to Reuters.

A rising dollar, fueled by expectations the U.S. Federal Reserve may start tightening policy sooner than previously expected, also weighed on oil prices.

Tensions in the Middle East kept price declines in check.

Israeli military said its aircraft struck 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.

Risks of potential supply disruptions amid a forecast for more storms in the Atlantic also supported prices, Reuters cited Moya as saying.

Prices also fell steeply in the previous session after the U.S. Energy Information Administration (EIA) said crude stockpiles rose by an unexpected 3.6 million barrels last week.

*This story was updated at 10:33 a.m. EBL time

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