Oil erased gains to trade near $44 a barrel in London as concerns about demand countered the buoying effect of a weaker dollar.
Brent futures slipped from near their highest level since March. Though crude was earlier supported by a less vigorous dollar, bearish signs persist in the physical market. China’s cooling oil demand has affected prices for Iraqi crude, and derivatives that help value North Sea grades showed renewed weakness. In America, crude stockpiles rose by 5 million barrels last week.
Oil jumped earlier this week after European Union leaders agreed on a stimulus package, but prices have struggled to break out of a tight range this month. While the race for a coronavirus vaccine intensifies, rising infections across major economies and the imminent easing of OPEC output cuts is keeping a lid on further price gains amid a patchy recovery in consumption.
“Uncertainty comes from demand,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. “It is imperative to follow the dollar exchange rate, as a layer of oil-demand support will disappear should the greenback start strengthening again.”
The recovery in U.S. gasoline demand has faltered, with Americans staying at home as the virus flares in the nation’s most populous states. The outlook wasn’t much better in Europe, with Finnish refiner Neste saying it expects oil products demand to be “severely reduced” in the third quarter.
