(Bloomberg) — Oil dropped ahead of an OPEC+ meeting this week at which the group may announce plans to start tapering historic production cuts even as the coronavirus surges unabated in many parts of the world.
Futures in New York fell toward $40 a barrel after closing up 2.4% on Friday. The producer bloc will review the state of the market at an online meeting on Wednesday amid expectations the alliance will soon begin unwinding the output curbs. Russia’s top oil companies are preparing to increase output next month in the absence of other guidance from the Energy Ministry, according to two people from the industry who spoke on condition of anonymity.
The increase in supply would come as the still-raging pandemic clouds the demand outlook. The U.S. is struggling to control the outbreak, with many states reversing re-opening plans. Australia’s second-largest city, meanwhile, went back into lockdown last week as the virus made a comeback there.
The OPEC+ cutbacks have been instrumental in driving the recovery in oil prices from their nadir in April and the challenge confronting the group is how to avoid an erosion of those hard-fought gains. The International Energy Agency said in a report Friday that fuel demand should rebound sharply over the next three months as economic activity resumes, while warning the virus is “casting a shadow over the outlook.”
West Texas Intermediate for August delivery fell 1.1% to $40.11 a barrel on the New York Mercantile Exchange as of 8:13 a.m. in Singapore. Brent for September settlement dropped 1% to $42.80 on the ICE Futures Europe exchange after finishing up 2.1% on Friday.
The Joint Ministerial Monitoring Committee, the panel that reviews OPEC+’s progress, will consider whether the alliance should keep 9.6 million barrels of daily output off the market for another month, or taper the cutback to 7.7 million barrels as originally planned. Members are leaning toward the latter option, according to several national delegates who asked not to be identified.
In the U.S. the number of active oil rigs fell by four last week to 181, the least since June 2009, according to Baker Hughes Co. data released Friday. A resumption of Libyan crude exports also looks to be in doubt after military commander Khalifa Haftar, a key player in the nation’s civil war, warned he would continue to blockade ports and fields.
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