Oil prices dropped on Thursday, despite a fall in U.S. inventories last week, amid a stronger dollar and a renewed wave of COVID-19 cases in Europe that led to renewed travel restrictions in several countries.
Brent crude futures fell 21 cents, or 0.5%, to $41.56 a barrel by 0922 GMT, while U.S. West Texas Intermediate (WTI) crude futures dropped 26 cents, or 0.7%, to $39.67 a barrel.
Both benchmarks climbed slightly on Wednesday after government data showed U.S. oil inventories dropped last week.
Crude stocks fell by 1.6 million barrels, gasoline by 4 million barrels, and distillate stockpiles posted a surprise drawdown of 3.4 million barrels.
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Still, fuel demand in the U.S. remains subdued as the pandemic limits travel. The four-week average of gasoline demand was 8.5 million barrels per day (bpd) last week, the government data showed, down 9% from a year earlier.
“The current economic and oil backdrop is anything but encouraging and this capped the attempted rally,” Tamas Varga of oil brokerage PVM said.
The jitters over demand and economic outlook due to the coronavirus resurgence have spurred a rally in the dollar as investors turned to safer assets, adding pressure on oil prices. A stronger dollar makes oil, priced in the U.S. greenback, less attractive to global buyers.
Prices were also restrained by data showing a cooling of U.S. business activity in September, the stalemate in the U.S. Congress over more fiscal stimulus and U.S. Federal Reserve officials flagging concerns about a stalling recovery
In Europe, Britain, Germany and France imposed restrictions to stem new coronavirus infections – all factors affecting the fuel demand outlook.
On the supply side, the market remains wary of a resumption of exports from Libya, although it is unclear how quickly it can ramp up volumes.
An oil tanker is expected to load a 1-million-barrel cargo this week from storage tanks at the Hariga terminal, the first since January.
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