U.S. Crude Falls on Worries About Glut, Brent Gains

U.S. crude oil and Brent traded in opposite directions on Friday as a sell-off ahead of Monday's expiration kept U.S. prices down, while discussions of OPEC cutting output put strength into the market overseas.

With the two crudes trading lower in the morning, analysts and traders said much of the sell off in the WTI contract was a result of liquidation of long positions before the expiration on Monday.

However, Brent saw a number of rallies through the day, pushing the arbitrage between the two grades to $6.74 <CL-LCO1=R>, the widest since Sept. 8.

U.S. crude fell 66 cents to settle at $92.41 a barrel while Brent rose 69 cents to settle at $98.39 a barrel.

"I think overall talk about OPEC cutting back production is giving some strength on Brent. The cuts are inevitable but who and how," said Carl Larry, chief executive officer of consultancy Oil Outlooks in Houston, Texas. "On the U.S. side, WTI has been under pressure because people are moving into maintenance season."

Money flowing into equities and away from commodities also caused some choppy trading in the day, analysts said.

Renewed strength in the U.S. dollar against major currencies pressured oil. The dollar index was on track for its tenth straight week of gains. The euro also reached a 14-month low against the U.S. dollar.

The stronger dollar has put a drag on oil markets as it makes commodities denominated in the U.S. currency more expensive for holders of other currencies.

"What we're seeing is a situation where everybody is concerned about the demand side of the equation and oversupply. Let's face it, the market is very heavy right now," said Phil Flynn, an analyst at Price Futures Group in Chicago. "The concerns previously about war and political risk have faded. (Also) with the Fed talking about raising interest rates, you're creating this huge upwards momentum in the dollar."

On Monday, Brent hit its lowest point since July 2012 as oil supply overwhelmed lackluster demand in Europe and Asia, with a glut of high-quality, light oil pushing North Sea crude for immediate delivery to big discounts below futures.

After the price slide, OPEC's secretary-general said he expected the group, which pumps around a third of the world's oil, to reduce production next year.

Weak home prices in China added to fears of a slowdown in the world's second-largest economy.

This week the Organization for Economic Cooperation and Development slashed its growth forecasts for major developed economies to 0.8 percent this year from a previously projected 1.2 percent.

(By Catherine Ngai; Additional reporting by Christopher Johnson in London, Jane Xie in Singapore; Editing by Michael Urquhart, David Gregorio, Chris Reese and James Dalgleish)