Oil prices fell on Tuesday on worries that new restrictions to stem surging US and Asian coronavirus cases could threaten a recovery in fuel demand just as OPEC+ producers prepare to increase output from August.

Brent crude futures fell 44 cents to $42.28 a barrel by 0840 GMT and US West Texas Intermediate (WTI) crude futures slid 53 cents to $39.57.

The governor of California, the United States’ most populous state, on Monday ordered bars to shut and restaurants, movie theatres, zoos and museums to cease indoor operations as coronavirus cases soared.
California’s moves follow the recent reinstatement of some restrictions in other states, such as Florida and Texas. New restrictions were also introduced in Asia and Australia.

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.

The oil market is moving closer to balance as demand gradually rises, OPEC’s secretary general said on Monday.
China’s June crude oil imports hit both daily and monthly highs, data showed on Tuesday.

However, Citi analysts said that 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 US Energy Information Administration.

Analysts estimate that US gasoline stockpiles fell by 900,000 barrels and crude oil inventories by 2.3 million barrels in the week to July 10, a preliminary Reuters poll showed.