Oil heads for weekly decline as Covid-19 cases surge

Asian shares stutter on virus risk and US-China tension

Demand for crude in 2020 is set to drop by 8.1 million barrels per day - the steepest decline in history. Reuters

Oil prices fell on Friday, adding to steep losses from the previous session, and were heading for weekly declines on worries that renewed lockdowns following a surge in coronavirus cases in the US and elsewhere would suppress fuel demand.

Brent dropped 0.6 per cent to trade at $42.10 per barrel, while West Texas Intermediate, the key US gauge, fell 0.8 per cent to $39.29 per barrel.

Brent looks set for a weekly decline of nearly 2 per cent and US crude for a fall of more than 3 per cent. Trading was quiet with Singapore on holiday for an election.

While many analysts are expecting economies and fuel demand to bounce back from the pandemic, record daily increases in coronavirus infections in the US, the world's biggest oil consumer, raised concerns about the pace of any recovery.

"I do not suspect many oil traders will be looking to place significant bids in the market today, suggesting prices may continue to wallow into the weekend," said Stephen Innes, chief global markets strategist at AxiCorp.

More than 60,500 new Covid-19 cases were reported in the US on Thursday, setting a daily record, with Americans being told to take new precautions. The tally was also the highest daily count yet for any country since the pathogen emerged in China late last year.

Meanwhile, the Asian shares and the US stock futures also fell on Friday as surge in coronavirus cases stoked concern about economic recovery.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.74 per cent. Australian stocks declined by 0.31 per cent as an extension of loan payment deferrals hit the banking sector. Japanese stocks were down by 0.58 per cent.

Shares in China fell 0.72 per cent from a five-year high, the first decline in more than a week, as state media discouraged retail investors from chasing the market higher and worries about China-US tensions re-emerged.

The number of Americans filing for jobless benefits dropped to a near four-month low last week, data showed.

But investors remained cautious as the report also said a record 32.9 million people were collecting unemployment benefits in the third week of June, supporting expectations the labour market would take years to recover from the pandemic.

"Weakness in financial stocks comes ahead of next week's second quarter reporting season that sees JP Morgan, Citigroup and Wells Fargo all report next Tuesday and following news that Wells Fargo is planning to cut thousands of jobs starting later this year," said Ray Attrill, head of FX strategy at National Australia Bank.