UPDATE 9-Oil prices edge lower on U.S.-China tensions

* China tells U.S. to shut Chengdu consulate
* Barclays sees near-tem oil price correction if recovery
slows
* Euro zone businesses bounce back in July
* U.S. oil rig count rises for first week since March

(Updates prices, adds Baker Hughes rig data)
By Stephanie Kelly
NEW YORK, July 24 (Reuters) - Oil prices fell on Friday,
pressured by tensions between the United States and China, but
some supportive economic data in Europe tempered losses.
Brent crude futures LCOc1 fell 34 cents to $42.97 a barrel
by 1:11 p.m. EDT (1711 GMT). U.S. West Texas Intermediate (WTI)
crude CLc1 futures slipped 18 cents to $40.89 a barrel.
For the week, Brent was on track to fall 0.5%, while U.S.
crude was set to rise 0.6%.
China ordered the United States to close its consulate in
the city of Chengdu on Friday, responding to a U.S. demand this
week that China close its Houston consulate. The renewed tensions between the world's top two oil
consumers stoked worries about oil demand, which already faces
headwinds including rising coronavirus cases in the United
States.
The resurgent pandemic has darkened the U.S. economic
outlook. Some states have reinstated restrictions to curb the
latest outbreak, which is expected to decrease fuel consumption.
The number of Americans filing for unemployment benefits hit
1.416 million last week, unexpectedly rising for the first time
in nearly four months. Oil prices could see a near-term correction if a recovery in
fuel demand slows further, especially in the United States,
Barclays Commodities Research said.
Still, the bank lowered its oil market surplus forecast for
2020 to an average of 2.5 million barrels per day (bpd) from 3.5
million bpd previously.
In the United States, the oil and gas rig count, an early
indicator of future output, fell by two to an all-time low of
251 in the week to July 24, according to data on Friday from
energy services firm Baker Hughes Co BKR.N . However, energy
firms added one oil rig in the first weekly increase since
March. Softening Friday's market losses, Euro zone business
activity grew in July for the first time since the coronavirus
pandemic hit, according to IHS Markit's flash Composite
Purchasing Managers' Index (PMI). The index is seen as a good
indicator of the bloc's economic health. "The economic data in Europe was much better than
anticipated, which would suggest that demand destruction in
recent months because of COVID-19 may not have been as bad as
people thought," said Phil Flynn, senior analyst at Price
Futures group in Chicago.
Meanwhile, U.S. business activity increased to a six-month
high in July. U.S. companies, however, reported a drop in new
orders as new COVID-19 cases spiked across the country.