By Barani Krishnan and Geoffrey Smith 

Investing.com – Like a shadow in the background that could suddenly leap to the front depending on how the light is cast, OPEC’s looming supply increase is threatening to shroud any bright fundamentals left in a pandemic-hit oil market that ended July trading up just $1 a barrel.

The Saudi-led Organization of Petroleum Exporting Countries is due to restore 2 million barrels of oil a day to world markets under the terms of its deal on output restraint with non-members allies steered by Russia. 

That’s coming at a time when the rebound worldwide in fuel demand is under threat from a second wave of Covid-19, as more and more countries (notably Australia and the U.K. in the last 24 hours) re-tighten lockdown measures to stop local flare-ups. 

New York-traded , the benchmark for U.S. crude futures, settled Friday up 35 cents, or 0.9%, at $40.27 per barrel. At the end of June, the front-month contract for WTI settled at $39.27.

London-traded , the bellwether for global crude prices, closed the New York session up 27 cents, or 0.6%, at $43.52. 

OPEC’s decision to cut 7.5 million barrels from August instead of the 9.6-million bpd observed since May comes on the heels of data showing the U.S. economy suffered its worst collapse ever — a drop of nearly 33% — in the second quarter.

“When OPEC Plus decided to raise output early last month, it looked as if the market was going to need those extra barrels,” said Phil Flynn, analyst at the Price Futures Group in Chicago. 

“Yet now with more uncertainty about a second wave of the coronavirus and a devastating weekly jobs reports, a historically wrong U.S. GDP number, perhaps at this time, a production increase might not be a great idea,” added Flynn, who typically has a bullish outlook on oil.

Friday’s trade in oil was also suppressed by news showing record quarterly losses at both Exxon Mobil (NYSE:) and Chevron (NYSE:NYSE:), the two largest oil producers in the United States. Earlier in the week, ConocoPhillips (NYSE:), another U.S. oil giant, announced a $1-billion loss. 

On the virus front, there have been signs that the curve of new infections was flattening in the major fuel-consuming regions of California, Texas, and Florida. 

But with White House Task Force Coordinator Deborah Birx warning on Thursday that travel had been a major factor in the their second wave – and in a rising wave of cases across Midwestern states now – the threat to demand is still clear enough. 

According to Gasbuddy’s Patrick de Haan, gasoline demand on Thursday was -4.50% from the week ago level, while for the five days through Thursday, it was down -0.9% on the corresponding period a week earlier.

Reflecting those concerns, U.S. gasoline futures fell in Friday’s trade, underperforming the broader crude market. New York-traded RBOB gasoline settled down 1.97 cents, or 1.4%, at $1.17 per gallon. For July, U.S. gasoline settled down 1.2%.