Oil drops as China's rising COVID cases renew fuel demand concerns

© Reuters. FILE PHOTO: Sticker reads crude oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas, U.S. November 22, 2019. REUTERS/Angus Mordant

By Sonali Paul

MELBOURNE (Reuters) - Oil prices fell $1 in early trading in Asia on Monday, cutting into gains from Friday, as attention turned back to rising COVID-19 cases in China and the prospect of lockdowns again reducing fuel demand in the world's top oil importing nation.

U.S. West Texas Intermediate (WTI) crude futures for August delivery dropped $1.54, or 1.6%, to $96.05 a barrel at 0055 GMT, after climbing 1.9% on Friday.

Brent crude futures for September settlement fell $1.47, or 1.5%, to $99.69 a barrel, paring a 2.1% gain from Friday.

China, the world's second-largest oil consumer, on Sunday reported 691 new COVID cases for Saturday, up from 547 the previous day, with locally transmitted cases at the highest since May 23.

"Oil is opening the week softer as the market digests the demand impact of the rise in new COVID cases in China and as the market cautiously awaits the monumental event risk if Nord Stream 1 gas flow from Russia to Europe will resume later this week," said Stephen Innes, managing partner at SPI Asset Management.

The Nord Stream 1 pipeline, the biggest system carrying Russian natural gas to Germany, began annual maintenance on July 11 due to last 10 days. Governments, markets and companies fear the shutdown may be extended because of the war in Ukraine.

Loss of that gas would hit Germany, the world's fourth-largest economy, hard and heighten the threat of a recession.

As expected, U.S. President Joe Biden's trip to Saudi Arabia failed to yield any pledge from the top OPEC producer to boost oil supply. That expectation of no extra oil helped push prices up last Friday ahead of Biden's talks with Saudi Crown Prince Mohammed bin Salman.

Biden wants Gulf oil producers to step up output to help tame oil prices and drive down inflation.

On Sunday, Amos Hochstein, a senior U.S. State Department adviser for energy security, said on CBS' Face the Nation that the trip would result in oil producers taking "a few more steps" in terms of supply though he did not say which country or countries would boost output.

The next meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, together called OPEC+, on Aug. 3, will be closely watched as their existing output pact expires in September.