Oil prices dip on virus worries; US stock draw, China data check losses

SINGAPORE: Oil prices eased for a second day on Thursday as mounting coronavirus cases globally raised demand concerns, although a drawdown in US crude stocks for a fifth straight week and robust data from China capped losses.

Brent crude oil futures fell 18 cents, or 0.3%, to $55.88 a barrel by 0425 GMT, while US West Texas Intermediate (WTI) slipped by 11 cents, or 0.2%, to $52.80 a barrel.

"Oil market's sizzling rally likely took a hiatus as the stronger dollar and the omnipresent gasoline supply overhang offset the evaporating US crude inventories," said Stephen Innes, chief global market strategist at Axi.

US crude oil stockpiles last week fell more than expected, while gasoline and distillate inventories rose as refiners ramped up output to its highest level since August, the Energy Information Administration said on Wednesday.

China, the world's second largest oil consumer, reported its biggest daily jump in new COVID-19 cases in more than 10 months as infections in northeastern Heilongjiang province nearly tripled, underscoring the growing threat ahead of a major national holiday.

Governments across Europe announced tighter and longer coronavirus lockdowns on Wednesday due to a fast-spreading COVID variant first detected in Britain and as vaccinations are not expected to help much for another two to three months.

Oil producers face an unprecedented challenge to balance supply and demand as factors including the pace and response to COVID-19 vaccines cloud the outlook, an official with International Energy Agency (IEA) said.

China's total crude oil imports surged 7.3% in 2020 despite the coronavirus shock earlier in the year, with record arrivals in the second and third quarters as refineries expanded operations and low prices encouraged stockpiling, customs data showed on Thursday.

A hefty COVID-19 relief package, which US President-elect Joe Biden is due to unveil on Thursday, also kept losses in check.

"China data continues to outperform, and a monstrous US stimulus package appears to be on the way," said Jeffrey Halley, senior market analyst at OANDA.

"Both should ensure that plenty of physical buyers will appear on any price dips, limiting losses."