- OPEC and allied producers set to meet on July 1
- Oil prices climbed for five weeks in a row
LONDON: Oil prices slipped on Monday after hitting more than 2-1/2 year highs earlier in the session, as a spike in COVID-19 cases in Asia put a brake on their rally before this week's OPEC+ meeting.
Brent was down 20 cents, or 0.3%, to $75.98 a barrel at 1040 GMT, after climbing to $76.60, its highest since October 2018. U.S. crude was 10 cents, or 0.1%, lower at $73.95 a barrel.
But analysts said the rally had not yet run out of steam.
"With sentiment running high, market watchers say crude prices are likely to keep rising ... Vaccination rollouts and strong summer demand make for a potent bullish cocktail," said Stephen Brennock of oil broker PVM.
Oil prices rose for a fifth week last week as fuel demand rebounded on strong economic growth and increased travel during the northern hemisphere summer, while crude supplies were tight as the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, maintained production cuts.
OPEC+ is gradually easing those curbs, adding 2.1 million barrels per day (bpd) to the market from May to July. OPEC+, which meets on July 1, could decide to add further barrels in August as oil prices rise with recovering demand.
ANZ and ING expect OPEC+ to increase output by about 500,000 bpd in August, which is likely to support higher prices.
Rising COVID-19 cases in Asia have however put a modest dampener on the outlook. Indonesia is battling record-high cases, Malaysia is set to extend a lockdown and Thailand has announced new COVID-related restrictions.
Australia also reported on Sunday one of the highest numbers of locally acquired coronavirus cases this year, triggering lockdowns in some cities.
Iran and the United States are expected to resume indirect talks on reviving a pact over Tehran's nuclear work.
Agreement could lead to a lifting of U.S. sanctions and more Iranian crude on the market. But tensions rose after U.S. air strikes on Sunday against Iran-backed militias in Iraq and Syria.
"We do not currently expect Iranian exports to return anytime soon, in other words, so OPEC+ should have free rein at its meeting," said Commerzbank analyst Eugen Weinberg.