By Florence Tan and Jacob Gronholt-Pedersen
SINGAPORE (Reuters) - Oil fell more than 1 percent on Tuesday ahead of weekly U.S. crude inventory data that is expected to hit another high and as Saudi Arabia pledged to supply more oil to China if needed.
U.S. commercial crude stockpiles were expected to have risen last week for the 16th straight week, up from a record 489 million barrels, even though drilling activity fell, a preliminary survey by Reuters showed on Monday. [EIA/S]
Comments from top Saudi oil officials on Monday reiterated the country's position of keeping production high to meet demand as it maintains its market share.
Brent June crude futures had dropped 84 cents to $63.99 a barrel by 0702 GMT. U.S. June crude fell 84 cents to $56.14 a barrel.
The fall in prices "reflects the major gains that have been made in the last few weeks and a little bit of concern over what the inventory numbers in the U.S. might show", said Michael McCarthy, chief strategist at CMC Markets in Sydney.
Brent crude hit a 4-1/2 month high last week, while West Texas Intermediate (WTI) has risen for six consecutive weeks, underpinned by net long positions on both contracts as speculators bet on a decline in U.S. shale output.
While a roughly 50 percent drop in global oil prices since June last year has helped economies in Asia, it has posed "difficult challenges" for many oil producers, Saudi Arabian Oil Minister Ali al-Naimi said on Tuesday.
"Sudden rises or falls in the cost of oil are not welcome ... It's in all our interests to ensure stable prices," he said in Beijing.
Geopolitical tension, mainly in Yemen and Syria, and unplanned production outages, including in the North Sea and Brazil, have prompted Barclays (LONDON:BARC) to raise its oil price forecast.
The bank raised its Brent forecast by $9 to $60 a barrel for 2015 and by $8 to $68 in 2016. It also raised its WTI price outlook by $8 to $54 a barrel this year and by $7 to $64 for 2016.
Still, it warned in a research note that "the oil market is not out of the woods yet and weak fundamentals will weigh on prevailing bullish market sentiment in the second quarter".
The two oil benchmarks are sitting just above key technical levels, with Brent above $64-$64.50 and WTI above $56, McCarthy said.
Bets on rising Brent crude prices rose for a fifth straight week to a new record, InterContinental Exchange (ICE) data showed on Monday. [CFTC/]
