Oil prices reverse early losses, but glut worries cap gains

TOKYO: Crude prices reversed early losses on Monday as the dollar lost its momentum, but persistent concerns over a global glut despite some signs producers may try to tackle weak oil futures kept a lid on gains.

Oil prices fell about 1 percent earlier in the day with the dollar holding firm as disappointing U.S. jobs growth data did little to change investors' perception that the Federal Reserve is likely to raise interest rates in coming months.

By 0653 GMT, London Brent crude for November delivery was up 7 cents at $46.90 a barrel, recovering as the dollar slipped slightly versus a basket of currencies. Brent settled up $1.38 on Friday.

U.S. crude for October delivery was unchanged at $44.44 a barrel. Trading is likely to be limited on Monday because of the U.S. Labor Day holiday.

Brent rallied to above $50 a barrel in late August, helped by growing talk of a coordinated production freeze, but prices have since fallen as few believe OPEC will cut output.

Russian Energy Minister Alexander Novak has said that an oil production freeze would be one of the issues discussed by crude producers later this month in Algeria.

"Even though there will be discussions in Algeria, there's no strong feeling that anything will be done, so the supply remains high," Tony Nunan, oil risk manager at Japan's Mitsubishi Corp in Tokyo said.

"Saudi Arabia's position hasn't changed. They are open to some kind of production freeze if Iran and other major producers join," Nunan added.

Iran, OPEC's third largest producer, has said it would only cooperate in talks to freeze output if fellow exporters recognised its right to fully regain market share.

"Even if successful, an OPEC freeze would likely be a short-term positive but a medium-term negative for oil prices," Morgan Stanley analysts wrote in a note. "If a short-term freeze were implemented, oil prices would rise on the news, but it would do little to correct the near-term oversupply."

Iran is ready to raise its output to 4 million barrels per day in a couple of months depending on market demand, a senior official from the National Iranian Oil Company said.