Oil rises slightly ahead of OPEC+ meeting

An aerial view shows pumpjacks in the South Belridge Oil Field on April 24, 2020 near McKittrick, California.
David McNew | Getty Images

Oil prices rose slightly on Tuesday as OPEC and its allies cut production by more than agreed to in June, although demand concerns lingered due to increased cases of COVID-19 in the United States.

Brent crude futures gained 18 cents, or 0.42%, to settle at $42.90 per barrel, after moving lower earlier in the session. West Texas Intermediate crude futures settled 19 cents, or 0.47%, higher at $40.29 per barrel.

The Organization of the Petroleum Exporting Countries and its allies led by Russia, collectively known as OPEC+, have delivered compliance of 107% with their agreed oil output cuts in June, an OPEC+ source said on Tuesday.

The market are keenly awaiting news from OPEC+ on the next level of production cuts. OPEC's Joint Technical Committee meets on Tuesday, with the Joint Ministerial Monitoring Committee due to meet on Wednesday.

Under the existing supply pact, OPEC+ is set to taper its record production cut of 9.7 million barrels per day (bpd) to 7.7 million bpd from August through December.

"OPEC+ speculation had weighed the market down, and now the compliance data came out, and that's supportive," said John Kilduff, a partner at Again Capital Management in New York.

Still, the market remained cautious on concerns that states could increase lock-down measures as California did on Monday, following similar moves in other states, such as Florida and Texas.

New restrictions were also introduced in Asia and Australia.

The oil market is moving closer to balance as demand gradually rises, OPEC's secretary general said on Monday.

OPEC's monthly report said it expected global oil demand to grow by a record 7 million bpd next year, but that demand will still be weaker than pre-COVID.

China's June crude oil imports hit both daily and monthly highs, data showed.

However, Citi analysts said the looming supply increase could weigh on prices given demand uncertainties. Morgan Stanley said oil demand is unlikely to exceed pre-COVID levels until late 2021.

The market will also be watching for fuel consumption data due on Tuesday from the American Petroleum Institute industry group and on Wednesday from the U.S. Energy Information Administration.

Analysts estimate that U.S. gasoline stockpiles fell by 900,000 barrels and crude oil inventories by 2.3 million barrels last week, a preliminary Reuters poll showed.