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UPDATE 2-Oil rises on weak dollar, but bloated supply still weighs

Published 2017-03-28, 03:02 a/m
© Reuters.  UPDATE 2-Oil rises on weak dollar, but bloated supply still weighs
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* Dollar has weakened nearly 3 pct since early March

* But market still "awash with crude" -consultant

* Barclays (LON:BARC) expects record U.S. oil output this year

* Bloated U.S. market to trigger more crude exports (Updates prices)

By Henning Gloystein

SINGAPORE, March 28 (Reuters) - Oil prices rose on Tuesday, supported by a weaker dollar, but crude continued to be weighed down by surging U.S. production and uncertainty over whether an OPEC-led supply cut is big enough to rebalance the market.

Prices for front-month Brent crude futures LCOc1 , the international benchmark for oil, had gained 18 cents from their last close to $50.93 per barrel by 0652 GMT.

In the United States, West Texas Intermediate (WTI) crude futures CLc1 were up 20 cents at $47.93 a barrel.

Traders said crude futures were receiving some support from a weak dollar.

The greenback has lost 2.9 percent in value against a basket of other leading currencies .DXY since its March peak on doubts over U.S. President Donald Trump's ability to push through his economic agenda. the dollar weakens, many traders pull money from foreign exchange markets and put it into commodities futures such as gold or crude instead. A weaker dollar also makes oil cheaper for countries using other currencies, potentially spurring import demand.

"Crude prices tested the support at $50 per barrel for Brent and rebounded from there," said Sukrit Vijayakar, director of energy consultancy Trifecta.

Physical fundamentals remained weak, however, with soaring U.S. output undermining efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to curb production to rein in a global fuel supply overhang and prop up prices.

"We now forecast U.S. crude oil production to reach a multi-decade high by December, within sight of the all-time high reached in 1970," Barclays said in a note to clients.

U.S. crude oil output has already risen 8.3 percent since mid-2016 to 9.13 million barrels per day (bpd). Output briefly reached 9.7 million bpd in April 2015, the highest since May 1971.

Soaring production and brimming inventories have made U.S. WTI crude much cheaper than international peer Brent, which is being supported above $50 per barrel by the OPEC-led output cut.

As a result, record amounts of U.S. crude oil have found their way to Asia and other destinations this year, and more is expected to be shipped out as traders take advantage of arbitrage opportunities by sending excess U.S. crude into regions where it can find buyers. market still seems awash with crude," Trifecta's Vijayakar said.

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