Oil retreats on stronger dollar, United States crude discount wider

Crude Oil Slides Despite Inventories Decline

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The spread between Brent crude oil futures contracts and US West Texas Intermediate hit a fresh three-year high on Friday with the latter set for a second consecutive week of declines as US oil output comes close to matching that of top producer Russian Federation. The Bloomberg Dollar Spot Index rose 0.2 per cent.

WTI fell 86 cents to stand at $66.18 a barrel.

On Thursday, the premium for Brent over WTI surpassed US$11 a barrel, the largest since early 2015.

In fact prices along the US Gulf Coast and in the Permian basin area of Texas are even lower - with the discount down $US20 to $US30 a barrels at times because of surging production.

Kazakhstan's oil output, however, continued rising.

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The rise follows a huge increase of 15 oil rigs the week before.

But Hatsaturjants said oil is poised to recover after the EIA also posted a surprise weekly crude drawdown of 3.62 million barrels in the US.

Sample bottles of crude oil are seen in this illustration photo June 1, 2017.

This pushed Brent to a three-week low below $75 a barrel on Monday.

Energy ministers from Saudi Arabia, the United Arab Emirates, Kuwait, Algeria and Oman held an unofficial consultative meeting on Saturday in Kuwait City, the Kuwait News Agency reported, citing a statement from the joint ministerial monitoring committee of OPEC and non-OPEC countries.

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Global petroleum inventories declined through 2017 and the first quarter of 2018, marking the end of an extended period of oversupply in global petroleum markets that began before the Organization of the Petroleum Exporting Countries (OPEC) November 2016 agreement to cut production.

In addition to the EIA's numbers, which come close to matching those of top producer Russia, Baker Hughes disclosed in a report released Friday that USA energy companies added two oil rigs in the week to June 1, bringing the total count to 861, the highest level since March 2015. The difference is giving trading giants an opportunity to export millions of barrels as shale output continues to surge. It was also up 14.6% from March a year ago. The Permian basin, which stretches across West Texas and eastern New Mexico, is the largest US oilfield.

"You had the API showing a strong build in crude oil and nothing fantastic on the products", says Olivier Jakob, managing director of consultant Petromatrix GmbH.

The second-largest fall in May came from Venezuela, whose production declined to 1.45 million bpd from 1.50 million bpd, compared to the implied target of 1.972 million bpd, which means that Venezuela's involuntary "cut" in May was 617,000 bpd-more than the cut pledged and achieved by OPEC's biggest producer Saudi Arabia. Gas production was at 58.12 billion cubic metres (bcm) last month, or 1.87 bcm a day, versus 61.86 bcm in April.

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