Brent crude fell 31 cents, or 0.5%, at $64.67 a barrel by 11:11 a.m. (1511 GMT.) West Texas Intermediate US oil was down by 47 cents, or 0.8%, at $61.09 barrel. Both contracts earlier fell by more than $1 a barrel.
Ships were moving through the Suez Canal again after tugs on Monday refloated the Ever Given container carrier, which had blocked the passage for almost a week. A backlog of 422 ships which could be cleared in 3 -1/2 days, the canal’s chairman said.
“The price gains that accumulated during the Suez blockade were, as expected, short-lived and are now being erased with the gradual return to normal traffic,” Rystad Energy’s oil markets analyst Louise Dickson said.
With concerns about a shortage of physical supplies abating, the market is turning to Thursday’s meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, collectively known as OPEC+, to decide on production curbs.
Saudi Arabia is prepared to accept an extension of production cuts through June, and is also ready to prolong its own additional cuts amid the latest wave of coronavirus lockdowns, a source briefed on the matter said on Monday.
“The wobble we have seen in prices means that OPEC+ will likely need to take a cautious approach once again,” bank ING said. “We are of the view that the group will likely hold output levels unchanged.”
JP Morgan believes OPEC+ will largely roll over its production cuts into May and that Saudi Arabia will extend its voluntary cut by two more months until the end of June.
“We expect the alliance to start adding production in 500,000 barrel per day (bpd) increments beginning in June and lasting through August,” it said in a research note.
Renewed lockdowns and problems with vaccinations could prevent the recovery of up to 1 million bpd of oil demand in 2021, Rystad Energy said.
One challenge in capping global supply are under-the-radar exports by OPEC member Iran to China, ignoring US and U.N. sanctions on Tehran, according to traders and analysts.
China could receive up to one million barrels of Iranian crude a day this month passed off as crude from other origins, they said.
A dollar rally also weighed on oil prices as a stronger greenback makes dollar-priced crude more expensive to buyers in other currencies.
Also, US crude and fuel inventories were forecast to have risen last week, according to analysts polled by Reuters ahead of industry data from the American Petroleum Institute at 4:30 p.m. EDT (2030 GMT) and government data at 10:30 a.m. EDT (1430 GMT) on Wednesday.