Oil prices dropped by more than 1 per cent on Tuesday ahead of the expected release of US crude reserves to cool the market while resurgent Covid-19 cases in Europe also weighed on demand.
The United States' planned release of emergency oil reserves is part of a plan that President Joe Biden's administration has hashed out with China, India and Japan to lower energy prices.
Brent crude futures fell 69 cents, or 0.87 per cent, to $79.01 a barrel by 0938 GMT and US West Texas Intermediate (WTI) crude futures were down 98 cents, or 1.28 per cent, at $75.77.
"US President Biden is said to be preparing to announce a release of oil from its strategic petroleum reserve in concert with several other countries," ANZ said in a note.
The Opec+ alliance between the Organization of the Petroleum Exporting Countries (Opec) and allies including Russia has so far rebuffed repeated requests from Washington to pump more oil. On Monday prices rose more than 1 per cent on reports that the group could adjust planned increases to output if large consuming countries release crude from reserves or if the pandemic dampens demand.
Prices have dropped below $80 a barrel from a three-year high of more than $86 on Oct. 25 amid talks of a coordinated release and potential hit to energy demand from a fourth wave of Covid-19 cases in Europe.
A release from reserves is expected to have only a temporary impact on prices, analysts have said.
"As Europe, and in particular Eastern Europe, struggles to halt the spread of Covid-19, the risk of lockdown-like measures looms large," said Rystad Energy analyst Louise Dickson.
She said demand in November for road and jet fuel in Europe is expected to fall to 7.8 million barrels per day (bpd) from 8.1 million bpd in October, though part of that is a normal decline for this time of year.
"If a new wave of lockdowns are enacted in Europe, oil prices will not be spared during the remainder of the flu season in the northern hemisphere," Dickson said in emailed comments. --Reuters