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Oil prices fell 2% on Thursday on a surge in coronavirus cases that triggered fears of a hit to demand and the latest diplomatic spat between the United States and China, outweighing the benefit of a weaker dollar.

Brent futures fell $1.01, or 2.3%, to $43.28 a barrel, while West Texas Intermediate crude settled 1.98%, or 83 cents, lower at $41.07 per barrel.

Both benchmarks earlier traded close to four-month highs hit a few days ago.

The U.S. dollar was trading at its lowest against a basket of currencies since September 2018. A weaker dollar usually spurs buying of dollar-priced commodities, like oil, because they become cheaper for holders of other currencies.

A rise in U.S. oil inventories also weighed on prices.

U.S. crude and distillate inventories rose unexpectedly and fuel demand slipped last week, the U.S. Energy Information Administration said on Wednesday.

U.S. coronavirus cases approached 4 million on Thursday, with more than 2,600 new cases every hour on average - the highest rate in the world, a Reuters tally showed.

Reference: CNBC