Oil prices dropped on Tuesday on fears that reimposed restrictions on businesses to control the surge in U.S. coronavirus cases could offset fuel demand recovery and expectations that OPEC+ might ease production cuts from August.
U.S. West Texas Intermediate crude futures fell 1.27%, or 51 cents, at $39.59 per barrel. Brent crude futures lost 1.01%, or 43 cents, at $42.29 per barrel. Both benchmarks lost over 2% in early morning trade.
Public places in California, such as bars, schools, and restaurants have been ordered to shut down by the governor. This came after the states of Florida and Texas imposed the same measures.
The market is awaiting OPEC and its allies’ meeting on Wednesday to assess output cuts for the next months. Under the current agreement, OPEC+ is set to cut output by 9.7 million bpd from August to December.
The market is also awaiting data on fuel consumption due later today. Analysts estimate U.S. gasoline inventories dropped by 900,000 barrels, while crude oil stockpiles fell 2.3 million barrels in the week ended July 10.