U.S. crude strengthens as dollar slips to four-day low

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Saudi Arabia's governor to the Organization of the Petroleum Exporting Countries (OPEC) says the kingdom's oil export will be little changed this month, dealing a setback to US President Donald Trump who had pinned hopes on Saudis to reduce oil prices in global markets.

Both Brent crude and U.S. benchmark West Texas Intermediate fell more than four per cent Monday, with the former hitting three-month lows of below $72 a barrel.

Brent for September settlement traded at $72.77 a barrel on the London-based ICE Futures Europe exchange, down 13c.

He also said concerns that Saudi Arabia and its partners are moving to oversupply the market substantially are "without basis".

But prices found some support after OPEC's largest oil producer said it would temper its exports next month. Ultimately, the price hike serves the interest of oil-dependent economies like Saudi Arabia, Russia and Iraq, especially since they can serve as substitutes for Iranian oil. Yesterday, crude oil prices moved up, despite higher-than-expected USA inventories based on official data.

Traders will now be looking towards data from industry group the American Petroleum Institute, due later Tuesday, for an indication of United States crude stockpiles.

Crude prices pulled back from highs earlier in the session as traders cashed in on profits, said John Kilduff, a partner at Again Capital Management in NY.

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The U.S. Energy Information Administration said on Wednesday domestic crude production reached a record 11 million bpd last week.

Furthermore, if any cartellike actions by the USA were to hike oil prices, American consumers would suffer since the country remains a net oil importer.

Since January 2017, OPEC and non-OPEC countries did manage to bring back supplies to 5-year averages having cut production by about 1.8 million barrels a day, and in the process helping lift prices to a three-year high of more than $80 a barrel in May.

Crude also strengthened on forecasts that inventories at the USA oil delivery hub for WTI in Cushing, Oklahoma fell 1.8 million barrels, or 6.2 percent, through Tuesday, traders said, citing energy information provider Genscape.

"While Saudi Arabia is under pressure from Trump to keep oil prices low, it probably won't like them to be too low at the same time", said Hong Sungki, a commodities trader at NH Investment & Securities Co.in Seoul. In June, production of crude oil hit 10.7 million bpd and production of natural gas liquids hit 4.2 million bpd.

USA refiners ran full-tilt in the second quarter, fueled by cheap domestic crude and fat margins that should boost earnings, though their heavy activity could eventually saturate the market with gasoline, sapping profits down the road.

The price of USA crude oil is dropping still further as oversupply in the market continues to dominate trading. The gains represent a rapid increase in output, as the data, if confirmed by monthly figures, puts the United States as the second largest producer of crude oil, just behind Russian Federation, which was producing 11.2 million bpd in early July.

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