Oil prices surrendered earlier gains on Tuesday as investors embraced expectations that major oil producers will confirm a plan to add supply later on Tuesday amid diminishing concerns over the spread of the Omicron variant of COVID-19.
Brent crude futures lost 25 cents to $78.74 a barrel at 0739 GMT, while US West Texas Intermediate (WTI) crude inched down by 19 cents to $75.89 a barrel.
The benchmark contracts both climbed more than 1% on Monday.
"Number one driver (of global oil prices) at the moment is management of the supply side of the market by (producer alliance) OPEC+," said Virendra Chauhan, analyst from Energy Aspects.
Chauhan added that fuel demand concerns from the spread of Omicron are subsiding and the planned releases of crude from various national strategic petroleum reserves are smaller than expected.
The Organization of the Petroleum Exporting Countries (OPEC), Russia and allies, together called OPEC+, are due to meet on Tuesday. The Joint Ministerial Monitoring Committee will meet at 1200 GMT, followed by a ministerial meeting at 1300 GMT, both by video conference.
Three OPEC+ sources told Reuters the group is likely to stick to its plan to increase output by 400,000 barrels per day in February, as it has done each month since August, Reuters said.
RBC Capital Markets analysts said OPEC+ was unlikely to change course given the current price outlook, pressure from the administration of US President Joe Biden to boost supply, and no major new COVID-19 mobility curbs.
"Though Omicron (COVID-19 variant) cases continue to climb in key geographies, the absence of widespread lockdown restrictions will likely keep near-term demand concerns in check," RBC analysts said in a note.
Despite the emergence of Omicron and its potential impact on international travel, economies such as Australia are sticking to their reopening plans.
Factory activity also grew in Asia last month as companies took global cases of Omicron in stride.
However, analysts warned that OPEC+ may have to change tack if tension between the West and Russia over Ukraine flares up and hits fuel supplies, or Iran's nuclear talks with major powers make progress, which would lead to an end to oil sanctions on Iran.
"We think these two events represent major wildcards that could quickly alter the price trajectory and test OPEC's rapid response mechanism," RBC analysts said.
