Oil down on Saudi output worry

Oil slid giving back more of last week’s gains as investors took profits on worries that higher Saudi Arabia output would feed the global supply glut.

The number of oil rigs in the United States notched another weekly decline, but crude prices did not move much on the data from oil services firm Baker Hughes.

Crude rebounded early last week, but the rally stalled on Thursday as the dollar strengthened against the euro due to developments in Greece’s debt crisis, which still dominated sentiment on global markets. Strength in the greenback makes oil, sold in dollars, less affordable to euro holders.

“The Greece debt debate is clobbering the euro, kiboshing a rally in crude,” said Matt Smith, director of commodity research at energy intelligence firm ClipperDatadata. “Rumblings of an impending rise in Saudi production is also providing a downbeat end to the week.”

Crude futures extended their downdraft as Saudi Arabia said it was ready to increase oil output in coming months to a new record.

Brent crude LCOc1 settled down $1.24, or 2 percent, at $63.87. For the week, Brent ended up 0.7 percent.

U.S. crude CLc1 fell 81 cents, or 1.3 percent, to $59.96. It rose 1.5 percent on the week.

In May, Saudi Arabia pumped a record 10.3 million barrels per day. The kingdom is the leading member of the Organization of the Petroleum Exporting Countries, and OPEC produces 1 million to 2 million bpd above its target of 30 million bpd.

While Saudi supply is growing, U.S. shale oil producers are cutting the number of rigs. Baker Hughes reported on Friday that energy firms pulled another seven rigs from U.S. oil fields this week, the most since late May.

On Thursday, the International Energy Agency said it expected world oil demand to rise more than expected this year on the back of economic recovery and a relatively cold winter in the northern hemisphere.

But JBC Energy analysts said the IEA focused on the first half of 2015, meaning demand would tail off by the year-end.

“I think oil is stuck in a range until we get clearer info on inventory trends,” said ICAP crude oil broker Scott Shelton.