Oil prices declined towards $70 a barrel on Thursday as more countries imposed fresh movement restrictions to counter a surge in COVID-19 cases, though Middle East tensions offered support.
Japan is poised to expand emergency restrictions to more prefectures while China, the world's second-largest oil consumer, has imposed restrictions in some cities and cancelled flights, threatening fuel demand.
Brent crude oil futures dropped by 38 cents, or 0.54%, to $70 a barrel by 0837 GMT after dipping below that threshold for the first time since July 21.
US West Texas Intermediate (WTI) crude futures fell by 34 cents, or 0.5%, to $67.81. Both benchmarks fell by more than $2 a barrel on Wednesday.
"China is now facing its most challenging COVID-19 crisis since the initial outbreak was brought under control," analysts at consultancy FGE said in a note on Thursday.
"The COVID-19 resurgence and the reimposition of restrictions will have negative repercussions on domestic transport fuel demand in the near term," they said, adding that FGE expects gasoline demand to average about 80,000 barrels per day (bpd) less in August than in July.
In the United States, the world's biggest oil consumer, COVID-19 cases hit a six-month high with more than 100,000 infections reported on Wednesday, according to a Reuters tally.
Also weighing on prices was a surprise 3.6 million barrel build in US crude stockpiles last week in data from the US Energy Information Administration (EIA).
Tensions in the Middle East kept price declines in check, however.
Israeli aircraft struck what the country's military said were rocket launch sites in south Lebanon early on Thursday in response to earlier projectile fire towards Israel.
The exchange came after an attack on a tanker off the coast of Oman last Thursday, which Israel blamed on Iran. Two crew members, a Briton and a Romanian, were killed.
"With tensions brewing amongst Iran and world powers over last week's drone attack, it seems nuclear deal talks will be lengthy and unlikely to provide imminent sanction relief for Iran," said Edward Moya, senior analyst at OANDA.
