* U.S. crude short-covering after rally on inventory rise
* U.S. implements tariffs on Chinese goods on Friday
* Saudi Arabia raises oil supply sharply in June
* Baker Hughes rig count shows yr/yr increase of 100 (New throughout; adds comment, updates prices)
By Ayenat Mersie
NEW YORK, July 6 (Reuters) - Oil was mixed on Friday as a Canadian supply outage supported U.S. crude prices, while an increase in production from OPEC's biggest exporter Saudi Arabia pushed Brent lower.
U.S. crude futures CLc1 gained 86 cents, or 1.2 percent, to settle at $73.80 a barrel. Global benchmark Brent LCOc1 slipped 28 cents to settle at $77.11 a barrel.
For the week, WTI futures lost about 0.5 percent after hitting a 3-1/2-year high on Tuesday, while Brent lost about 3 percent.
U.S. crude was bullish after official data on Thursday showed inventories at Cushing, the delivery point for U.S. crude futures, fell to their lowest in 3-1/2 years.
That came after an outage at a major Canadian oil sands facility cut regional supply. The outage at the 360,000 barrels per day (bpd) Syncrude facility in Canada has contributed to a sharp reduction in the discount for U.S. crude versus Brent crude over the past month.
The discount has halved to $5.54 a barrel on Friday from $11.57 in early June.
"We're continuing to see - and I expect the trend will continue - lower inventories in Cushing in July, resulting in a very tight light sweet crude market," said Andrew Lipow, president of Lipow Associates.
"That has been exacerbated by the Canadian Syncrude outage...which has resulted in a scramble for supplies in the Midwest. I do expect that at least over the next few weeks, the Brent-WTI spread is going to narrow."
Brent was being pressured by expectations for higher Saudi and Russia production, which impacts Europe and Asia, where Brent is the benchmark, more than markets dominated by U.S. crude prices.
Saudi Arabia told the Organization of the Petroleum Exporting Countries that it increased production by almost 500,000 barrels per day last month. and its allies agreed earlier this month to a modest increase in output to dampen the oil price rally, which hit a 3-1/2 year high. The supply increase reversed some of the cuts that OPEC and other major producers put in place in early 2017 to end several years of supply glut.
Saudi Arabia also said it would reduce the official selling price of its August barrels.
U.S. markets also garnered support from a government employment report showing better-than-expected growth in jobs. That blunted the impact of an escalating U.S.-China trade war. seeing a bounce to the upside thanks to spillover from a really good jobs number and strength in equity markets, as well as a draw in Cushing stocks," said Jim Ritterbusch, president of Ritterbusch and Associates.
The trade war has yet to have a direct impact on oil markets, but China has indicated it could place tariffs on U.S. crude imports.
If that happens, "Chinese demand would then shift to other suppliers. Because the oil market is already in tight supply due to the numerous outages, this would drive international prices (Brent) further up," Commerzbank (DE:CBKG) said in a note.
U.S. producers continued to bring more rigs into oilfields already producing at record levels. The U.S. rig count, an early indicator of future output, was up by five in the week to July 6, according to General Electric (NYSE:GE) Co's GE.N Baker Hughes energy services firm. RIG/U
That brings the total count to 863, up 100 from last year.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ GRAPHIC: U.S. vs international oil prices
https://reut.rs/2KL7XoZ GRAPHIC: Global crude oil supply & demand balance
https://reut.rs/2IYnqAb
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>