Oil prices dipped on Friday, erasing earlier gains, as new coronavirus cases spiked in the United States and China, and on growing concerns about rising U.S. output ticking up while crude stockpiles sat at record highs.
Brent was on track for a weekly decline of 3.1% and U.S. crude was headed for a weekly drop of 3.6%, after record U.S. crude inventory data dragged prices down on Wednesday.
Earlier gains, supported by optimism over rising road traffic boosting fuel demand, were erased in early U.S. trading on fears that spiking COVID-19 infections in large gasoline-consuming U.S. states could stall the demand recovery. Cases have risen sharply in California, Texas and Florida, the three most populous U.S. states.
Friday morning, Texas Governor Greg Abbott reversed the state's reopening plan, ordering most bars to close due to the surge in cases.
That could undermine the steady increase in refining output, with U.S. refiners now operating at nearly 75% of their capacity, per official government data.
"Employers are delaying the return of their employees back to the office and that will impact the return of gasoline demand," said Andrew Lipow, president of Lipow Oil Associates.
The global economic outlook has also worsened or at best stayed about the same in the past month, a majority of economists polled by Reuters said, and the recession under way is expected to be deeper than earlier predicted.
A survey of executives in the top U.S. oil and gas producing region by the Dallas Federal Reserve Bank found more than half of executives who cut production expect to resume some output by the end of July.
U.S. and Canadian energy firms cut the number of oil and natural gas rigs operating to a record low again this week, according to data from Baker Hughes.