Oil down 2 percent as Russian output cuts stall

By Devika Krishna Kumar

NEW YORK (Reuters) - Oil prices fell nearly 2 percent on Thursday after Russian oil production remained unchanged in February, showing weak compliance with a global deal to curb supply to tighten the oversupplied market.

Russia's February oil output was unchanged from January at 11.11 million barrels per day (bpd), energy ministry data showed, with cuts remaining at 100,000 bpd or just a third of the levels pledged by Moscow under the agreement with the Organization of the Petroleum Exporting Countries.

Both benchmarks were 1.8 percent lower with Brent futures $1.02 lower at $55.34 per barrel and U.S. crude down 98 cents lower at $52.85 by 12:44 p.m. EST (1744 GMT).

A stronger dollar also weighed on green-back denominated oil, making it more expensive for buyers in other currencies. The dollar rose to seven week highs against a basket of currencies after hawkish comments by a Federal Reserve official encouraged investors to expect a near-term interest rate hike. [USD/]

The oil markets extended losses from Wednesday when government data showed crude inventories in the United States, the world's biggest oil consumer, rose for an eighth straight week to a record 520.2 million barrels last week.

Oil prices, however, have been unusually stable since producers agreed in November to reduce the oversupply that has weighed on prices for more than two years, with both Brent and U.S. crude locked in $5 ranges.

"There is a very stale smell hanging over the market," Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen, told Reuters Global Oil Forum.

"I still see the risk of $50 a barrel before $60 on Brent, but have to acknowledge that we have so far seen very limited selling appetite."

Separately from its deal with Russia, OPEC has boosted already strong compliance with the group's six-month deal that began in January to around 94 percent, after it cut output for a second month in February, a Reuters survey found. [OPEC/O]

"While constructive, we continue to view Saudi Arabia's willingness to sacrifice market share beyond its commitment to OPEC as more of a temporary sprint than a more sustainable effort," Tim Evans, Citi Futures' energy futures specialist, said in a note.

Russian Energy Minister Alexander Novak said it was too early to say if the deal to reduce oil production would be extended beyond the end of June. OPEC, Russia and others are due to agree on output policy in the next three months.

"It is premature to talk of what we will discuss in April-May," Novak told Reuters in an interview.

Novak forecast Brent crude would average between $55 and $60 a barrel this year, with Russia's flagship Urals crude oil blend probably trading $2-$3 a barrel below that.

(Additional reporting by Christopher Johnson in London, Naveen Thukral in Singapore; Editing by Ruth Pitchford and Marguerita Choy)