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Oil drops as Suez opens, focus turns to OPEC+ output cuts

Oil prices fell on Tuesday as the Suez Canal opened up after days closed by a grounded supercarrier and focus turned to an OPEC+ meeting this week where the extension of supply curbs may be on the table amid new coronavirus pandemic lockdowns.

Brent crude was down 15 cents, or 0.2%, at $64.83 a barrel by 04 0651 GMT. U.S. oil was off by 12 cents, or 0.2%, at $61.44 barrel.

Ships were moving through the Suez Canal again on Tuesday after tugs refloated the giant Ever Given container carrier, which had been blocking a narrow section of the passage for almost a week, causing a huge build-up of vessels around the waterway.

With concerns about a shortage of physical supplies abating, the market is turning its focus to Thursday's meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia in Vienna, collectively known as OPEC+.

"The Saudi-led decision to hold back more oil production will yield an extraordinarily tight oil market with global stock draws," said Avtar Sandu, senior commodities manager at Phillip Futures in Singapore.

OPEC+ will discuss whether to keep in place curbs on output that have kept millions of barrels a day off the market to support prices, a strategy that has largely worked in recent months.

Saudi Arabia is prepared to accept an extension of the production cuts through June, and is also ready to prolong voluntary unilateral curbs amid the latest wave of coronavirus lockdowns, a source briefed on the matter said on Monday.

Stymieing efforts to contain global supply are rising exports under the radar from OPEC member Iran to China, which is ignoring U.S. and United Nations sanctions on the country and importing higher amounts of Iranian oil, according to traders and analysts.

China may receive as much as 1 million barrels a day this month in imports from Iran passed off as crude from other origins.

Efforts to control the COVID-19 pandemic remain an issue.

More than 127.43 million people have been reported to be infected by the novel coronavirus globally, and the death toll is approaching 3 million, according to a Reuters tally.

In Europe, rising numbers in a third wave of infections are alarming authorities, with France's Finance Minister Bruno Le Maire saying "all options are on the table" to protect the public.

"In the short term (the) oil market may be volatile with frequent pull-back as crude prices are beginning to struggle as U.S. supply is also picking up and demand in Europe faces headwinds," said Phillip Futures' Sandu.

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