Oil drops more than 2% on China blockades, US unemployment data

NEW YORK (Reuters) – Oil prices fell more than 2% on Friday as concerns about Chinese cities frozen due to coronavirus outbreaks tempered a rally led by strong import data from the largest crude oil importer in the world and the United States are planning a large stimulus package.

Brent fell $ 1.33, or 2.3%, to $ 55.17 at 11:59 am EST (1559 GMT), after gaining 0.6% on Thursday. US West Texas Intermediate crude fell $ 1.17, or 2.1% to $ 52.44 a barrel, after a more than 1% rise in the previous session.

Both benchmarks, which peaked in nearly a year earlier in the week, were heading towards their first weekly decline in three weeks.

As manufacturers face unprecedented challenges in balancing supply and demand equations with computation involving vaccine launch versus blockages, financial contracts have been spurred by strong stocks and a weaker dollar, which makes oil cheaper, coupled with strong Chinese demand.

These positives were called into question on Friday as the dollar rose and China stepped up its blocking measures.

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“In terms of the ability to talk about demand, Asia was the only strength,” said John Kilduff, partner of Again Capital Management in New York. “This renewed bloc hits the center of the demand picture in Asia. It is a problem. “

China’s crude oil imports increased 7.3% in 2020, with record arrivals in two out of four quarters as refineries increased runs and low prices pushed inventories, customs data showed Thursday.

But China reported the largest number of daily COVID-19 cases in more than 10 months on Friday, limiting one week that has brought over 28 million people under lockdown as it suffered its first coronavirus death on the mainland since May.

“The spread of the COVID-19 pandemic is once again center stage and traders are increasingly concerned about the long duration of the European blockade and new restrictions (in) China”, Bjornar Tonnage from Rystad Energy said.

“The market is structurally bullish, but it may be too far ahead of the forward-looking fundamentals.”

Additional reporting by Noah Browning and Aaron Sheldrick; Editing by Marguerita Choy and Louise Heavens