Singapore: Oil prices extended declines on Monday after two straight days of losses late last week as high production offset strong refinery runs, but a storm that could impact Gulf of Mexico operations supported U.S. crude.
Saudi Arabia, the world`s biggest crude oil exporter, hinted late last week that it was ready to increase production above record levels to meet strong demand, if needed, pushing down prices.
The decline in prices followed two sessions of falls last Thursday and Friday after U.S. crude had risen close to $62 per barrel earlier in the week, a level it only climbed above during one day in May this year.
U.S. investment bank Jefferies said on Monday that oil markets remained oversupplied in the near-term.
"Fundamental data indicates that the oil market is oversupplied by over 2 million barrels per day," the bank said. But it added that due to a recent rally in prices it had lifted its average 2015 Brent and WTI price forecasts to $60 and $55.10 per barrel respectively, up from $52.50 and $48.60 a barrel previously.
Front-month U.S. crude had fallen 22 cents to $59.74 a barrel by 0605 GMT. Brent futures were down 21 cents at $63.66 a barrel.
"Oil prices remain under pressure as the hype of strong seasonal demand comes to an end and markets refocus on bearish supply-side fundamentals," ANZ bank said.
Monday`s smaller drop in U.S. prices was a result of a large tropical disturbance in the southern Gulf of Mexico which the U.S. National Hurricane Center said had a 70 percent chance of developing into a tropical cyclone in the next 48 hours, potentially threatening oil production output in the region.
The spread between the two crude futures benchmarks narrowed to around $3.50 per barrel, its lowest since April when the spread touched 2015 lows.
Barclays said that because of stronger U.S. refinery margins than in Europe or Asia, it expected the Brent-WTI spread to narrow to $3 a barrel.
