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By Bloomberg

Oil fell after the International Energy Agency said this year’s price rally is under threat as OPEC’s biggest members pump record amounts of crude.

Futures dropped as much as 1.4 percent in London, reversing an earlier gain of 0.6 percent. Saudi Arabia, Iraq and the United Arab Emirates each produced record amounts of oil in May, the IEA said. The Paris-based adviser to 29 industrialized nations also raised its forecast for global demand this year by 0.3 percent.

“The fact remains that OPEC will produce one million barrels a day in the second half of this year more than is required,” Ole Hansen, head of commodity strategy at Copenhagen-based Saxon Bank A/S, said by e-mail. “The demand growth revision gave oil an initial boost.”

Oil’s recovery from a six-year low has slowed amid speculation that global production will expand as prices rebound, prolonging a surplus. The Organization of Petroleum Exporting Countries last week decided to maintain its quota as it sought to defend market share against higher-cost producers.

Brent for July settlement fell as much as 94 cents to $64.76 a barrel on the London-based ICE Futures Europe exchange and traded at $65.05 at 1:31 p.m. local time. It gained 82 cents to $65.70 on Wednesday. The European benchmark crude traded at a premium of $4.33 to West Texas Intermediate.

OPEC Supply

WTI for July delivery fell 67 cents, or 1.1 percent, to $60.76 a barrel in electronic trading on the New York Mercantile Exchange. The contract climbed $1.29 to $61.43 on Wednesday. The volume of all futures traded was about 19 percent below the 100- day average for the time of day. Prices are up 14 percent this year.

Saudi Arabia, the world’s largest crude exporter, boosted output to a record 10.25 million barrels a day last month from 10.16 million in April, according to the IEA. The IEA’s data for Saudi Arabia start in 1984. OPEC’s own data go back further and show the kingdom is pumping the most since August 1981.

Output from the OPEC, which provides around 40 percent of the world’s oil, rose by 50,000 barrels a day to 31.33 million barrels a day, the highest level since August 2012, the IEA said.

“Barring unforeseen outages, OPEC is likely to keep pumping at around 31 million barrels a day during the coming months as Middle East producers sustain higher rates to preserve market share,” the report said.

The IEA boosted its 2015 estimates for global oil demand by 320,000 barrels a day from last month’s report to 94 million barrels a day. Momentum for demand growth will probably ease somewhat in the second half of this year, partly due to a deterioration in economic prospects for developed countries, it said.