Oil prices slip as COVID-19 case surge dents fuel demand hopes

Crude oil prices on track for monthly gain as dollar supports

US West Texas Intermediate crude futures CLc1 gained $0.47, or 1.2%, to $41.51 a barrel.

Even though experts agree that the likelihood is zero, US president Donald Trump on Thursday tweeting that the November presidential elections should be delayed to ensure safe voting during the Covid pandemic caused panic among traders and a corresponding loss in oil prices. On Thursday, Brent closed down 1.9% but had recovered much of the ground lost from the lowest level since July 10.

However, gains were just modest for crude oil futures as worries about energy demand outlook persisted due to continued surge in new coronavirus cases across the world.

Brent crude futures settled at US$43.75 a barrel, up 53 USA cents or 1.2 per cent.

"There's an assumption those tankers pretty much let go of all their oil and so the expectation is that the OPEC cuts are going to lead to bigger draws in the United States", said Phil Flynn, senior analyst at Price Futures Group in Chicago.

On the data front, US crude oil inventories dropped by 10.6 million barrels to 526 million barrels last week, the IEA reported.

"We now only rarely hear talk of V-shaped demand recoveries and extremely tight markets, the views that allowed Brent to rally beyond United States dollars 40/bbl", Standard Chartered said.

The dollar extended its dramatic fall on Friday and was on course for its biggest monthly drop in a decade after news on Thursday that USA gross domestic product collapsed at a 32.9% annualised rate - the steepest decline in output since records began in 1947.

Investors shift funds away from dollar to dollar-priced commodities due to their drop in price amid weaker USD.

"Global stimulus and a weak dollar will continue to support oil prices, as historically oil is seen as a hedge against inflation", said Keshav Lohiya, chief executive officer of consultancy Oilytics.

Analysts' expectations in a Reuters poll were for an increase of 357,000 barrels. "Transportation accounts for two-thirds of oil demand", Dhar said.

Bjornar Tonhaugen, head of oil markets at Oslo-based Rystad Energy, said traders will next week closely monitor oil output increases by the Organization of the Petroleum Exporting Countries (OPEC) and its allies.

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