NEW YORK (REUTERS) - Renowned oil trader Andy Hall expects US crude to rise above US$65 (S$87.60) a barrel despite high global production of oil led by Opec, citing the drop in US oil rigs as a factor.

"Despite a collapse in rig counts in the US, oil production has yet to register a sustained decline. But it will come," Mr Hall, an avowed oil bull said in the monthly letter to investors in his US$3.3 billion hedge fund Astenbeck Capital Management.

Mr Hall's predictions on the oil market have helped him amass a small fortune; he was once awarded a US$100 million bonus for his oil trading genius and bought a castle in Germany.

Some in the market believe oil prices have found a floor after last year's rout. While drilling has become more efficient, Mr Hall argued that cannot compensate in the near-term for the 60 per cent drop in the US rig count.

"Oil prices will continue to work their way higher over time toward the global marginal cost of production, and in our view that is above US$65 WTI," Hall said, referring to the US crude benchmark, West Texas Intermediate.

US crude futures settled at US$58 a barrel on Thursday, falling nearly 3 per cent for a second straight day, ahead of an Opec meeting where the producer group is expected to keep production levels unchanged. Brent, the global benchmark, slid as much over the two days, settling at just above US$62.

While oil prices have trended higher since April, Brent and US crude are still about 40 per cent below last summer's peaks above $100.

Mr Hall acknowledged the dynamics of the oil market have changed profoundly, with Opec favoring market share defense over production cuts to shore up prices.

He also said that while Saudia Arabia, the Opec kingpin and No. 1 oil exporter, has hit record highs in production, its spare crude capacity will "essentially fall to zero" soon from peak demand for electricity from air conditioning during the summer.

Saudi Arabia was also fighting a proxy war with rival Iran in neighboring Yemen amid worrying signs of unrest within the kingdom, particularly in its oil-producing region. "Yet, the geopolitical risk premium in the price today is zero at best," Hall said. "We are confident, however, that price risk is now skewed firmly to the upside."

Saudi Arabia on Thursday raised the official selling price for its benchmark crude to Asia in July.

Astenbeck lost almost 4 per cent in May as crude prices fell but was still up about 5 per cent on the year, returns information accompanying the investor letter showed.