Oil prices fell for the sixth consecutive day on Thursday, amid worries about a fall in demand expectations due to an increase in the number of COVID cases around the world.
Oil prices have been impacted by slower growth in China, the world's biggest oil importer, which has introduced new new restrictions in response to rising COVID-19 cases as the Delta variant, first identified in India, continues to spread.
“Investors are worried that oil prices went too high during its rallying phase when optimism was sky-high about demand returning to normal," said Fawad Razaqzada, market analyst with ThinkMarkets.
"But now investors are forced to reassess those rosy views and are realising that demand is actually a little softer."
A rise in the dollar index following the release of the US Federal Reserve’s meeting minutes has added to the pressure on oil.
The notes showed officials agreed on slowing the pace of bond purchases later this year. Markets have been on edge about the prospect of tapering for weeks now.
“As crude oil is priced in dollars, oil prices move opposite to the dollar index. So, when the American dollar appreciates in value, oil becomes more expensive for international buyers. This pushes oil prices down with the appreciation of the US dollar,” said Naeem Aslam, chief market analyst at Ava Trade.
The US dollar index rallied upwards to 0.1%, its highest mark since April.
The fall in prices was hindered, to some extent, by a decline in crude oil inventories last week, Aslam added.
Stockpiles dropped 3.2m barrels, settling at 435.5 million barrels. This is the lowest level of oil inventory since January 2020.
Meanwhile the Energy Information Administration said gasoline stockpiles rose by 696,000 barrels to 228.2m, while analysts had expected a 1.7m-barrel drop.
US shale oil output is expected to rise to 8.1m barrels per day in September, the highest since May 2020.
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