Oil falls on more Saudi crude production, strong U.S. dollar

Oil prices fell sharply on Friday on news Saudi Arabia was offering more oil to Asian customers, with additional pressure from a stronger dollar and weak equities.

Brent’s premium to U.S. crude hit a record high for a second time this week, moving above $19 a barrel, supported by sweet crude production shut in by Libya’s conflict and disrupted North Sea production.

The dollar index strengthened as the euro fell across the board, and uncertainty about Greece’s debt problems and a slowing U.S. economy boosted risk-averse sentiment and pressured dollar-denominated oil prices.

U.S. stocks fell, with the S&P; 500 Index down more than 1% and the Nasdaq turning negative for the year as Wall Street resumed its pull-back on concerns about an economic slowdown.

Brent crude for July delivery fell 82 cents to $118.75 a barrel by 3 p.m. EDT (1900 GMT), off an earlier $120.07 peak and after closing at a five-week high the previous session.

U.S. July crude fell $2.64 to settle at $99.29 a barrel, slipping as low as $98.60 after pushing below front-month crude’s 100-day and 20-day moving averages.

U.S. crude had its second straight weekly loss, down 93 cents, or 0.93%, from the June 3 close at $100.22.

Crude trading volumes were on pace to equal 30-day averages. In the previous session, volume jumped to more than 1 million lots, 300,000 lots above the 30-day average.

SAUDIS OFFER OIL

“Saudi Arabia is offering oil even though OPEC didn’t have an agreement on production,” said Hamza Khan, analyst at the Schork Group in Villanova, Pennsylvania.

“And oil is reacting to a stronger dollar and weaker stock market, a reversal after the weak dollar and an equities bounce helped push oil higher on Thursday,” Khan added.

Oil prices were pressured early on Friday by news Saudi Arabia is offering more crude to Asian refiners for July, according to industry sources.

The news was evidence Saudi Arabia was unilaterally raising supplies after OPEC’s Wednesday meeting did not produce an agreement to boost output targets.

The kingdom also intends to boost production in July to 10 million barrels per day (bpd) from 8.8 million bpd in May, according to al-Hayat newspaper.

OPEC forecast a tightening world oil market in 2011. In its monthly report, OPEC said world demand for its crude oil would average 30.7 million bpd in the second half of 2011, much higher than the 28.97 million bpd the 12-member group produced in May.

CHINA’S EXPORT GROWTH SLOWS

China’s smaller-than-expected trade surplus in May had some oil analysts and traders wary of slowing growth in the world’s No. 2 oil consumer, even as crude imports in May rose slightly versus April and were up 20% from the year-ago period.

Copper prices also were pressured by the China trade data. Imports of the key industrial metal slowed in May.

Oil’s price slip came even as Libya’s turmoil and unrest in Syria and Saudi Arabia’s neighbor Yemen continued.

Tens of thousands of Yemenis took to the streets of the capital Sanaa with opposing demands. Anti-government protesters pressed for the removal of wounded President Ali Abdullah Saleh, who is in Saudi Arabia for medical treatment, while loyalists urged his return.

NATO warplanes pummeled a town west of Libya’s capital, state media said, soon after Western and Arab powers promised more than $1 billion to help rebels fighting to oust Muammar Gaddafi.

In Syria, thousands fled into Turkey fearing a military assault as the country braced for more violent protests against the rule of President Bashar al-Assad.