Crude oil falls as Saudis pump at record before OPEC meeting

Oil fell for the first time in three days as Saudi Arabia maintained crude output at a record in May before OPEC meets this week to discuss its production policy.

Saudi Arabia pumped 10.25 million barrels a day last month, unchanged from April and matching the highest level in monthly survey data compiled by Bloomberg since 1989.

The Organization of Petroleum Exporting Countries will probably maintain its collective quota at 30 million barrels when ministers gather June 5 in Vienna, a separate survey showed.

Oil’s recovery from a six-year low is stalling amid speculation a global glut will persist.

OPEC exceeded its collective target for a 12th consecutive month in May, according to data compiled by Bloomberg.

Given the group is pumping more than 31 million barrels a day, there’s a risk that its quota may be increased, Morgan Stanley analysts including Adam Longson said in a note Monday.

“OPEC isn’t expected to do anything supportive at the meeting Friday,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “The dollar’s return to rally mode is weighing on the market. The combination of OPEC and the dollar should set us up for a down week.”

West Texas Intermediate oil for July delivery declined 79 cents, or 1.3 percent, to $59.51 a barrel at 11:12 a.m. on the New York Mercantile Exchange. Trading volume was 27 percent below the 100-day average for the time of day.

Brent for July settlement fell $1.17, or 1.8 percent, to $64.39 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a $4.95 premium to WTI.

The dollar strengthened against the euro as the Federal Reserve moves closer to raising interest rates this year while European policy makers embrace monetary stimulus. A stronger dollar reduces the appeal of commodities priced in the U.S. currency as a store of value.

OPEC output increased 67,000 barrels to 31.579 million a day in May, according to the survey of oil companies, producers and analysts. Production from Iraq, the second-biggest of the group’s 12 members, accelerated by 197,000 barrels a day to a record 3.87 million, the survey showed as it shipped an all-time high of 3.145 million barrels a day last month.

Iraq is set to increase exports after starting a new grade. Shipments of Basrah Heavy crude start Monday, Oil Minister Adel Abdul Mahdi said on his Facebook page.

“OPEC continues to increase production with Saudi Arabia and Iraq producing 1.1 million barrels a day more than at the last meeting,” Ole Hansen, head of commodity strategy at Copenhagen-based Saxo Bank A/S, said by phone. “Until we see fresh new demand, the oil price will be allowed to drift lower as we have seen the top of the market.”

Speculators have tempered their crude wagers before the OPEC meeting. With bearish bets on WTI falling at a faster pace than bullish holdings, the net-long position rose for the first time in three weeks, U.S. Commodity Futures Trading Commission data for the seven days ended May 26 show.

Bullish bets on Brent fell for a third week, with net-long positions in futures and options combined cut to 222,357 contracts over the same period, according to ICE data.