Oil dips as investors eye US economy, Saudi output

Singapore: Oil edged lower on Monday, with Brent below $119, as growing investor concern about a slowdown in the United States and other industrialised economies combined with expectations that top exporter Saudi Arabia would increase output.

Japan’s core machinery orders unexpectedly fell in April, government data showed, adding to doubts about the pace of global economic recovery as the Federal Reserve’s $600 billion bond purchase program expires this month.

Brent crude for July LCOc2 slipped 20 cents to $118.58 a barrel by 0339 GMT, while U.S. crude shed 35 cents to $98.94, trading close to a record discount of almost $20 to the European benchmark as a glut in the U.S. Midwest persists.

Saudi Arabia will raise output to 10 million barrels per day (bpd) in July, Saudi newspaper al-Hayat reported on Friday, as Riyadh goes it alone to pump more outside official OPEC policy, aiming to place additional supplies among Asian buyers.

“Saudi Arabia is going to attempt to increase oil production and there are ongoing concerns about a global economic slowdown,” said Serene Lim, an oil analyst at ANZ in Singapore.

“If we continue seeing U.S. economic releases painting a weak picture, it’s something to watch out for. Today risk aversion is just flowing over from Friday.” U. S. crude shed 2.6 percent in Friday’s session.

Asian stocks extended a seven-week losing streak and the dollar gained more than 0.1 percent against a basket of currencies, as European powers haggle over a fresh rescue package for Greece.

The “money manager” speculator group cut its net long position on U.S. crude futures and options by 33,466 contracts to 190,974 in the week to June 7 on the New York Mercantile Exchange, the Commodity Futures Trading Commission said on Friday.

U.S. producer prices and retail sales data on Tuesday would provide a cue for prices, followed by industrial production and housing statistics due later in the week.

Top oil exporter Saudi Arabia has offered more crude to Asian refiners in July, evidence that it is taking steps to unilaterally increase supplies after OPEC talks collapsed last week.

But Iran’s OPEC governor said over the weekend an increase in crude output by the Saudis would not change market conditions as demand is for lighter oil than the kingdom provides, reiterating Tehran’s stance there was no need to boost production.

Continuing unrest in the Middle East and North Africa kept a floor under prices.

Rebels fighting against Libyan leader Muammar Gaddafi launched an offensive on Sunday to retake the oil town of Brega but were repelled in a battle which killed at least four fighters, rebels and doctors said.

The United Arab Emirates said on Sunday it had recognised Libyan rebels as the sole legitimate representative of the Libyan people, the state news agency reported, becoming the second Arab state to take such a move.

“The fact that over the weekend we saw some of the rebels fighting against Gadaffi forces and in Syria there are fears that it might slide into civil war will continue to support oil prices,” Lim said.

The main Syrian activist group organising protests said on Sunday a violent crackdown had killed 1,300 civilians and called on President Bashar al-Assad to step down to transform the country into a democracy.

In Yemen, talks to resolve the country’s political crisis have failed after the deputy to wounded President Ali Abdullah Saleh refused to speak with groups demanding he cede power immediately, opposition figures said.