Oil futures ease, face weekly decline as glut fears persist

By Keith Wallis

SINGAPORE (Reuters) - Crude oil futures eased on Friday, extending big falls in the previous session as investors reassessed U.S. data underlining the glut in petroleum, while Iraqi crude exports are also on the rise.

The global oversupply of oil has been easing but with huge amounts of crude being held in tanks and tankers on land and water, the rebalancing has taken longer than many expected.

"The market is getting a little bit nervous about the medium term. The inroads into global stockpiles of oil are not as great as anticipated," said Ric Spooner, chief market analyst at Sydney's CMC Markets.

Brent crude fell 11 cents, or 0.2 percent, to $46.09 a barrel as of 0700 GMT after closing 2.1 percent lower in the previous session. Brent is on track for a decline of more than 3 percent for the week.

U.S. West Texas Intermediate (WTI) dropped 27 cents, or 0.6 percent, to $44.48 a barrel after ending the previous session down 2.2 percent.

A weaker U.S. dollar helped support prices, which scraped into positive territory earlier in the session.

The dollar index slipped against a basket of currencies on Friday. A weaker greenback it makes dollar-traded commodities, including oil, cheaper for holders of other currencies.

While U.S. production has been falling, crude inventories are at a historically high of 519.5 million barrels for this time of year, the EIA said earlier this week.

Total U.S. crude and oil product stocks rose 2.62 million barrels to an all-time high of 2.08 billion barrels as gasoline stocks posted a surprise build of 911,000 barrels during summer driving season.

"There is so much oil in storage that it will take months to truly feel the erosion of the overhang," Energy Aspects said in a note.

In the Middle East, Iraq's oil exports are set to rise in July, according to loading data and an industry source, putting supply growth from OPEC's second-largest producer back on track after two months of declines.

Exports from southern Iraq in the first 21 days of July have averaged 3.28 million barrels per day (bpd), according to loading data tracked by Reuters and an industry source. That would be up from 3.18 million bpd in June.

The rise came as a report by BMI Research on Friday said fundamentals in the Asian diesel market remain weak, as demand for the fuel continues to wane in key Asian markets.

"Tight margins, ample supplies and brimming stockpiles at key diesel storage hubs suggest that a pullback in diesel output is imminent," the report said.

(Reporting by Keith Wallis; Additional reporting by Aaron Sheldrick; Editing by Richard Pullin)