Oil Prices Fall on Record U.S. Output, Stock Build

Oil prices fell on Thursday, pressured by a rising dollar and after official data showed an unexpected rise in U.S. crude stockpiles, U.S. output hit a record high and major oil exporters increased production.

Benchmark Brent crude oil fell $1.07 to a low of $71.83 a barrel before recovering to trade around $72.35 by 1304 GMT. On Wednesday, Brent hit a three-month low of $71.19. U.S. light crude was 25 cents lower at $67.51.

The U.S. dollar hit its highest level against a basket of other currencies since July 2017 on Thursday, up half a percent on the day.

"Oil prices are reversing course ... as a resurgent dollar keeps buyers at bay," said Stephen Brennock, analyst at London brokerage PVM Oil Associates.

Brent has fallen almost 9 percent from last week's high above $79 on emerging evidence of higher production from Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries, as well as Russia and the United States.

The U.S. Energy Information Administration said on Wednesday U.S. crude production had reached 11 million barrels per day (bpd) for the first time. The country has added nearly 1 million bpd in production since November, thanks to rapid increases in shale drilling.

Even higher U.S. production is likely, Rystad Energy said.

"We are still bullish on U.S. shale, though we expect to see a temporary plateau in 2019 due to the bottlenecks of pipelines and, indeed, manpower and drivers," said Yosuke Uehara, vice-president at Rystad Energy.

A sharp jump in U.S. crude oil inventories also added to the bearish tone in the market. U.S. crude stocks rose by 5.8 million barrels last week, compared with a forecast for a decline of 3.6 million barrels.

U.S. gasoline inventories dropped by 3.2 million barrels last week, while distillate stockpiles , which include diesel and heating oil, declined by 371,000 barrels, the EIA said.

A Reuters poll taken before the data release had forecast gasoline stocks would be unchanged and distillate stockpiles would show a build of around 900,000 barrels.

Meanwhile, OPEC and non-OPEC producers cut oil output in June by 20 percent more than agreed levels, compared with 47 percent in May, two sources familiar with the matter told Reuters on Wednesday.

Saudi Arabia boosted production sharply last month, raising crude shipments to world markets by 390,000 bpd to 7.6 million bpd, Kpler tanker-tracking data showed. That was the biggest increase since the end of 2016, according to the International Energy Agency.

A Reuters survey of OPEC production showed Saudi output at a near record, up 700,000 bpd at 10.70 million bpd.

Reporting by Christopher Johnson in London and Aaron Sheldrick in Tokyo