Brent Slips on Stronger Dollar, Ample Supply
Dollar index nears one-week high; High Saudi production, exports feed well-supplied market. U.S. crude may be supported by summer driving season.
Brent crude oil fell below $66 a barrel on Tuesday as the dollar strengthened and on evidence of ample supplies of Middle Eastern oil despite wars in northern Iraq, Syria and Yemen.
The dollar rose to almost a one-week high against a basket of currencies, recovering from a four-month low and making oil and other commodities more expensive for consumers in non-dollar
economies.
Crude rallied on Monday on worries that Middle Eastern oil supplies could be disrupted by escalating fighting in the region, but data suggested production from the Gulf was increasing.
"The oil market is generally oversupplied with high Saudi exports and OPEC is unlikely to cut production," said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.
"The dollar is also weighing on the market," he added.
Brent for July fell $1.04 to a low of $65.23 a barrel before recovering to around $65.30 by 1235 GMT. U.S. light crude oil was down 80 cents at $58.63 a barrel.
Saudi Arabia's crude exports hit their highest in almost a decade in March, official data showed on Monday, as the top oil exporter increased output to record levels.
The OPEC heavyweight shipped 7.898 million barrels per day (bpd) of crude in March, up from 7.350 million bpd in February, Joint Organisations Data Initiative (JODI) data showed.
Saudi Oil Minister Ali al-Naimi has said the kingdom pumped 10.3 million bpd of crude in March - above its previous record production of 10.2 million bpd in August 2013.
The JODI data calmed worries over the risks from fighting in Iraq, where Shi'ite militiamen have been deployed to battle Islamic State which seized the city of Ramadi.
Saudi-led forces have resumed military operations in Yemen after a five-day ceasefire despite appeals by the United Nations for time to allow humanitarian supplies into the country.
"Fears that fighting in Iraq and Yemen could hamper the oil supply have clearly given way to a more sober appraisal," said Carsten Fritsch, analyst at Commerzbank.
"Such concerns are exaggerated. In actual fact, the oil supply from the region has continued to grow."
Investors awaited U.S. oil inventory data from industry group the American Petroleum Institute at 2030 GMT on Tuesday and from the U.S. Department of Energy's Energy Information
Administration at 1430 GMT on Wednesday.
U.S. commercial crude oil inventories likely fell last week for a third consecutive week, a Reuters survey showed.
By Christopher Johnson