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Crude set for weekly loss as supply glut and dollar drag

LONDON: Crude oil prices were on track to post weekly losses on Friday as an oversupply of physical oil and a strong dollar bedevilled the market.

Benchmark prices regained some ground in early trading, but analysts saw little chance of a sustained recovery.

“We expect crude oil prices to remain under pressure in the short term as the stubborn global supply glut continues to dominate the market,” Sucden senior analyst Myrto Sokou said.

Brent crude futures LCOc1 had risen 40 cents to $48.38 a barrel by 0510 ET, still on track to fall more than 2 percent from the previous week.

U.S. crude futures CLc1 were trading at $45.45 a barrel, up 25 cents from the previous evening’s close.

The gains followed steep falls the previous day on climbing U.S. crude inventories, and analysts said oversupply would continue to pressure oil markets.

“With oil production of major producers strong, falling output from U.S. shale will be insufficient to balance the oversupplied oil market over the next two years,” BMI Research said.

BMI added that increased production from Russia and OPEC were serious obstacles to price recovery.

ANZ Bank said it expected U.S. crude futures to fall by 3 percent in the coming three months.

A senior OPEC delegate told Reuters the group is unlikely to cut output when it meets in December if major producers from outside the group are unwilling to help reduce supplies.

Also dragging on commodities were a strong U.S. dollar, which makes oil more expensive to holders of other currencies, and shaky economic conditions.

The greenback has gained almost 5 percent against a basket of other currencies .DXY since early October. U.S. jobs data due later in the day was expected to help nudge the U.S. Federal Reserve to be the first major central bank to raise interest rates since the financial crisis of 2008/2009.

The chief economist at the European Central Bank also warned on Friday that low oil prices could reflect weak economic conditions rather than just oversupply.

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