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 US 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, sending down prices.

"Momentum points to weaker commodity markets near term. Crude oil prices failed to hold at key resistance levels last week," ANZ said on Monday in a morning note, although it added that refinery oil consumption remained high due to healthy margins.

The decline in prices followed two sessions of falls last Thursday and Friday after US 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.

"US inventory draws have declined steadily since April with the largest draw occurring in the most recent week, driven by higher refinery runs and lower imports. However, we remain concerned that inventories may remain high by autumn and that the slowdown in US production has yet to materialize," Deutsche Bank said.

Front-month US crude had fallen 24 cents to $59.72 a barrel by 0334 GMT. Brent futures were down 40 cents at $63.47 a barrel.

The smaller drop in US prices was a result of a large tropical disturbance in the southern Gulf of Mexico that is seen by the US National Hurricane Center to have a 70 per cent chance of developing into a tropical cyclone over the next 48 hours, potentially threatening oil production output in the region.

The firmer US prices than Brent meant that 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. – Reuters