(Reuters) – Oil prices dropped on Friday and were headed for weekly declines as inventories rose and record-breaking new coronavirus cases in the United States stoked concern about the pace of economic recovery and fuel demand.
Brent crude was down by 95 cents, or 2.2%, at $41.40 a barrel by 0926 GMT, and U.S. oil fell $1.01, or 2.6%, at $38.61 a barrel.
Brent looks set for a weekly decline of almost 3.5% and U.S. crude for a fall of 5%.
More than 60,500 new COVID-19 cases were reported in the United States on Thursday, setting a daily record. The tally was also the highest daily count yet for any country since the pathogen emerged in China late last year.
“Further job losses are on the horizon as several states reimpose lockdown restrictions. America is still in the throes of the pandemic and this spells bad news for the oil demand outlook,” said Stephen Brennock of oil broker PVM.
In Australia, the government on Friday will consider reducing the number of citizens allowed to return to the country from overseas, after authorities ordered a new lockdown of the country’s second-most populous city, Melbourne.
The International Energy Agency (IEA) bumped up its 2020 oil demand forecast on Friday, but warned that the spread of COVID-19 posed a risk to the outlook.
“While the oil market has undoubtedly made progress … the large, and in some countries, accelerating number of COVID-19 cases is a disturbing reminder that the pandemic is not under control,” the IEA said.
Prices also dropped after Libya National Oil Corporation announced it had lifted its force majeure on all oil exports after a half-year blockade by eastern forces.
Meanwhile, oil inventories remain bloated due to the evaporation of demand for gasoline, diesel and other fuels during the initial outbreak.
“If we take a bigger picture view of the market, what stands out to us is that we have not yet seen much of a decline on the global inventory front,” JBC said.
U.S. crude oil inventories rose by nearly 6 million barrels last week after analysts had forecast a decline of just over half that figure.
The rising tension between the United States and China also put pressure on prices. China said on Friday it would impose reciprocal measures in response to U.S. sanctions on Chinese officials over alleged human rights abuses against the Uighur Muslim minority.