* Analysts warn that physical oil markets remain weak
* Saudis, Iran seem to ramp up output in race for customers
* Breaking down the barrel of oil: http://tmsnrt.rs/21bOZKa
By Henning Gloystein
SINGAPORE, April 26 (Reuters) - Crude oil futures rose early
on Tuesday, pushed up by a weaker dollar and a flood of new cash
into the market, but analysts warned that fundamentals remain
weak as a producer race for customers heats up in the Middle
East.
Front-month Brent crude futures LCOc1 were trading at
$44.84 per barrel at 0054 GMT, up 36 cents from their last
settlement, and U.S. crude futures CLc1 gained 39 cents at
$43.03.
Futures traders said prices had been lifted by a weaker
dollar overnight .DXY , which potentially spurs demand from
fuel importers using other currencies than the greenback, in
which crude is traded.
A rush of new investment into crude futures was also pushing
up prices as speculators raised their holdings of Brent futures
to a record high.
Yet in physical markets, analysts warned of more supply as
Saudi Arabia and Iran seemingly ramp up output in a race for
customers, further flooding the market with supplies that
already stand at 1 million to 2 million barrels of crude a day
in excess of demand.
"Saudi Arabia announced that it will complete an expansion
of its Shaybah oil field by June, pushing capacity to 12 million
barrels per day (bpd). Iran oil production has now increased by
1 million bpd since the beginning of the year, while Kuwait is
expecting output to reach 3.15 million bpd by June after the end
of a workers strike," ANZ bank said on Tuesday.
Iran wants to get back to pre-sanction production of 4
million bpd.
"The biggest bear risk to the oil market right now is that
Iran's ramp-up accelerates and then that Saudi Arabia does the
same," Citi said.
Citi said the Saudis would not sit idle and watch Iran
snap-up market share in hotly contested Asia.
"If anyone had a doubt about Saudi Aramco's ability to use
its logistical system and spot sales to increase market share,
its recent 730,000 barrel sale of a cargo to a Chinese teapot
refiner in Shandong should lay any doubts to rest," the bank
said.
The cargo will be lifted in June from Aramco's storage in
Japan's Okinawa prefecture and shipped to China's eastern
province of Shandong, Reuters reported on Monday.
"It looks increasingly likely that the Kingdom is targeting
another 0.5 million bpd of sales, bringing its production up to
a steadier 11 million bpd or higher," Citi said.
Traders said that a looming gasoline glut in Asia also
threatened the recent rise in crude prices as refiners flood the
market with unwanted products (Graphic: http://tmsnrt.rs/21bOZKa).
GRAPHIC-Breaking down a barrel of oil: http://tmsnrt.rs/21bOZKa
CHART-Singapore light distillate stocks http://tmsnrt.rs/1Vp4EpW
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(Editing by Richard Pullin)