Brent oil slipped below $97 a barrel on Tuesday, hit by dollar strength and ample supply, and U.S crude also fell as both benchmarks headed for the deepest quarterly drop in more than two years.
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The dollar surged to a four-year high against a basket of currencies and a two-year high against the euro, making oil more expensive for holders of other currencies.
Brent for November delivery was down 97 cents at $96.23 per barrel at 11:06 a.m. EDT (1506 GMT). It has lost nearly 14 percent in the third quarter, its biggest quarterly drop since April-June 2012.
U.S. crude dropped $1.35 to $93.22 a barrel and was also on track for its biggest quarterly fall since the second quarter of 2012.
"The dollar strength is pressuring oil across the board," said Andy Lebow, senior vice president at Jefferies Bache in New York, who also noted steady losses in U.S. gasoline futures , which were helping pull the oil complex lower.
Brent's premium over U.S. oil narrowed to the smallest in 13 months, touching $2.52 a barrel. It was above $9 in August and above $19 in November.
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Some traders noted that Brent crude was trading on a par with Light Louisiana Sweet <WTC-LLS>, the benchmark for the U.S. Gulf Coast, which could lead to heavier imports into the United States.
Firm U.S. and Chinese economic data limited losses, but analysts said that there was still negative momentum due to ample supply and slack demand.
Brent has slumped since June, when it hit this year's high of $115.71. Ample global supply, a strong dollar and lackluster economic data have driven prices as low as $95.60, a 26-month trough reached last week.
Brent has fallen 6.1 percent so far this month and U.S. crude around 2.4 percent.
"I still believe we're in a downward trend: the market is pretty well supplied," said Tony Machacek, an energy broker at Jefferies Bache. "Brent could potentially head towards $75."
A strike has trimmed Libya's oil output by 25,000 bpd to 900,000 bpd, a spokesman for state-run National Oil Corp said on Sunday, but production is still well up from a low of around 200,000 bpd earlier in the year. Strong production from the United States has also dented crude prices.
Activity in China's vast factory sector showed signs of steadying in September as export orders climbed, a private survey showed on Tuesday, easing fears of a hard landing but pointing still to a sluggish economy that faces considerable risks.
The market awaited weekly oil data from the American Petroleum Institute on Tuesday.
U.S. crude and distillate stockpiles were forecast to have increased in the week ended Sept. 26, while gasoline inventories probably fell, a Reuters poll showed on Monday.
(Reporting Edward McAllister and Catherine Ngai in New York and Simon Falush and Sam Wilkin in London; Editing by Keiron Henderson, Jane Baird and Peter Galloway)