Oil dips after rally, OPEC may ease supply curbs

By Naveen Thukral

SINGAPORE (Reuters) - Oil prices edged lower on Wednesday as the market took a breather on expectations OPEC may raise supplies as early as June, although geopolitical risks kept a floor under the market.

Brent futures dipped 4 cents to $79.53 a barrel by 0006 GMT, after climbing 35 cents on Tuesday. Last week, the global benchmark hit $80.50 a barrel, the highest since November 2014.

U.S. West Texas Intermediate (WTI) crude futures eased 2 cents to $72.18 a barrel, having climbed on Tuesday to $72.83 a barrel, the highest since November 2014.

"Geopolitical risks ... kept investors on their toes. U.S. Secretary of State Pompeo demanded that Iran halt all uranium enrichment and give nuclear inspectors access to the entire country," ANZ said in a note.

"However, investors are mindful of upcoming talks between Russia and Saudi Arabia about whether they should look at a controlled relaxation of over-compliance with their output cut agreement."

OPEC may decide to raise oil output as soon as June due to worries over Iranian and Venezuelan supply and after Washington raised concerns the oil rally was going too far, OPEC and oil industry sources familiar with the discussions told Reuters.

The OPEC-led supply curbs have largely cleared an inventory surplus in industrialized countries based on the deal's original goals, and stocks continue to decline.

Rising supply in the United States, where shale production is forecast to hit a record high in June, has limited the upward move in prices.

Concerns about a potential drop in Iranian oil exports following Washington's exit from a nuclear arms control deal with Tehran have driven prices to multi-year highs.

On Monday, the United States demanded Iran make sweeping changes - from dropping its nuclear program to pulling out of the Syrian civil war - or face severe economic sanctions.

Iran dismissed Washington's ultimatum and one senior Iranian official said it showed the United States is seeking "regime change" in Iran.

U.S. crude and distillate stockpiles fell last week, while gasoline inventories increased unexpectedly, data from industry group the American Petroleum Institute showed on Tuesday.

(Reporting by Naveen Thukral; editing by Richard Pullin)