By Stephanie Kelly
NEW YORK (Reuters) - U.S. crude futures fell more than $1 on Tuesday on worries that Saudi Arabia and Russia will pump more crude to boost supplies after more than a year of reducing worldwide inventories.
U.S. West Texas Intermediate (WTI) crude (CLc1) futures fell $1.15 to settle at $66.73 a barrel, a 1.7 percent loss. Brent crude (LCOc1) futures settled up 9 cents to $75.39 a barrel.
Saudi Arabia and Russia have discussed raising OPEC and non-OPEC oil production by 1 million barrels per day (bpd) to counter potential supply shortfalls from Venezuela and Iran.
Ahead of the Organization of the Petroleum Exporting Countries' meeting on June 22, concerns that Saudi Arabia and Russia could increase output have exerted downward pressure on oil prices.
"Market participants remain unsure how quickly an exit strategy can be implemented and whether it will go beyond just balancing the output drop from Venezuela," said Abhishek Kumar, senior energy analyst at Interfax Energy's Global Gas Analytics in London.
Credit Suisse analysts on Tuesday said even if Russia and OPEC producers raise output, they would likely only add an additional 500,000 bpd, which would leave inventories in the most developed countries short of the five-year average by the end of 2018.
Brent has fallen about 6 percent since hitting $80.50 on May 17, its highest since 2014.
Falling stocks and a stronger U.S. dollar index also weighed on prices. U.S. stock markets sank more than 1 percent, while the dollar gained about 0.7 percent. A stronger dollar makes greenback-denominated commodities more expensive for holders of other currencies.
"There is a risk-off trade today where we have seen people going back into dollar assets and less so in the stock market," said Brian Kessens, portfolio manager and managing director at Tortoise in Leawood, Kansas.
Hedge funds and other money managers reduced their net long position in Brent and WTI by 169 million barrels over the five weeks to May 22, suggesting unease about the rally's strength. (https://tmsnrt.rs/2LBbW8l).
Brent now commands its largest premium over U.S. futures in more than three years, meaning U.S. exports are rapidly becoming far more competitive globally than those from northern Europe, Russia or parts of the Middle East.
The spread between Brent and U.S. crude (CL-LCO1=R) hit $9.38 on Monday in thin holiday volumes, widest since March 2015.
U.S. oil production (C-OUT-T-EIA) has surged by more than 20 percent in the past two years to 10.7 million bpd. Record crude oil volumes from the United States are expected to head to Asia in the coming months.
(Reporting by Stephanie Kelly; Additional reporting by Amanda Cooper in London and Jane Chung in Seoul; Editing by David Goodman and Lisa Shumaker)