Oil prices edged lower on Thursday as a weaker dollar, which usually boosts oil prices, was outweighed by concerns about rising U.S. oil inventories and surging coronavirus cases.
Brent crude LCOc1 fell 9 cents, or 0.2%, to $44.20 a barrel by 1113 GMT, while U.S. West Texas Intermediate (WTI) crude CLc1 eased by 5 cents, or 0.1%, to $41.85.
The U.S. dollar index against a basket of currencies .DXY was trading near its lowest since early March. A weaker dollar usually spurs buying of dollar-priced commodities because they become cheaper for holders of other currencies.
“Genuine price support comes from the weak dollar, which helps physical oil demand,” said Tamas Varga of oil brokerage PVM.
Rising U.S. oil inventories, however, weighed on prices.
U.S. crude and distillate inventories rose unexpectedly and fuel demand slipped in the most recent week, the U.S. Energy Information Administration said on Wednesday, as a sharp rise in coronavirus cases starts to hit U.S. consumption.
U.S. coronavirus cases were approaching 4 million on Thursday, with more than 2,600 new cases every hour on average – the highest rate in the world, according to a Reuters tally.
Barclays said on Thursday that oil prices could experience a correction in the near term if a recovery in fuel demand slowed further, especially in the United States. The bank expects Brent to average $41 in 2020 and WTI to average $37.
Adding to uncertainty in the market, U.S.-China relations deteriorated further as Washington gave Beijing 72 hours to close its consulate in Houston after accusations of spying.
The Chinese foreign ministry said the U.S. move had “severely harmed” relations and that China would be forced to respond.