Oil falls 1% ahead of OPEC meeting as spike in Covid-19 cases weighs

An aerial view of oil tankers anchored near the ports of Long Beach and Los Angeles amid the coronavirus pandemic on April 28, 2020 off the coast of Long Beach, California.
Mario Tama | Getty Images

Oil prices were modestly lower on Monday as the market waits for direction from an OPEC meeting later this week that is expected to recommend an increase in output.

Weighing on prices were concerns that demand could take a hit if some governments reverse lockdowns after global coronavirus cases rose by a record daily amount.

The World Health Organization reported a record daily increase in global coronavirus cases on Sunday, with the total up by more than 230,000.

In the United States, infections surged over the weekend as Florida reported an increase of more than 15,000 new cases in 24 hours, a record for any state.

Brent futures fell 1 cent to $43.23 a barrel, while West Texas Intermediate crude fell 45 cents, or 1.1%, to settle at $40.10 per barrel.

Oil traders remained on edge as the Joint Ministerial Monitoring Committee (JMMC) of the Organization of the Petroleum Exporting Countries (OPEC) prepares to meet on Tuesday and Wednesday to recommend levels for future supply cuts.

OPEC and allies including Russia, a group known as OPEC+, are expected to ease their production cuts to 7.7 million barrels per day (bpd) after a recovery in global oil demand.

"That seems a quite risky option, with the safer being a one month extension ... It may be time to brace for volatility once again," said Edward Moya, senior market analyst at OANDA in New York, noting "The (OPEC+) cut was crucial to stabilizing oil prices."

OPEC+ cut output by a record 9.7 million bpd for May, June and July.

A gradual rise in oil demand as countries ease coronavirus lockdowns and record supply cuts by OPEC+ are bringing the oil market closer to balance, OPEC Secretary General Mohammad Barkindo said on Monday.

Libya, meanwhile, re-imposed force majeure on all oil exports on Sunday because of a renewed blockade by eastern forces. The move comes only two days after Libya exported its first crude cargo in six months.