LONDON: Brent oil slipped below $97 a barrel on Tuesday, hit by dollar strength and ample supply, and was heading for its deepest quarterly drop in more than two years.
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 33 cents at $96.87 per barrel by 1403 GMT. It has lost nearly 14 percent in the third quarter, its biggest quarterly drop since April-June 2012.
U.S. crude was down 84 cents at $93.73 a barrel and was also on track for its biggest quarterly fall since the second quarter of 2012.
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.
"The longer term trend is towards a falling price because China is slowing down and growth in Europe remains weak," said Michael Hewson, chief market analyst at CMC Markets.
The oil benchmark has slumped since June, when it hit this year's high of $115.71. Ample supply, a strong dollar and lacklustre 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. Many economists say the downward trend will continue.
"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."
Other analysts said Saudi Arabia and other OPEC members may intervene.
"They have no interest in a prolonged period of low prices and may moderate their output to bring prices to around $100 per barrel," said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas.
Asian buyers imported less than 1 million barrels per day (bpd) of Iranian crude for the first time this year in August, with Chinese buying reaching the lowest level since the easing of Western sanctions, although intake was still up 6.4 percent from a year ago.
Japan's domestic oil product sales fell for a fifth straight month in August from a year earlier, down nearly 10 percent to 2.91 million bpd, trade ministry data showed on Tuesday.
Providing some support to prices, upbeat U.S. consumer spending data on Monday for August provided signs of strength in the world's largest oil consumer.
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.
Also 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.
An increase in Libyan production has hammered Brent's premium over U.S. crude in recent weeks. The premium narrowed to the smallest in 13 months, touching $2.52 a barrel, from above $9 per barrel in August and above $19 in November.
The market was awaiting weekly oil data from the American Petroleum Institute later in the day.
U.S. commercial crude oil and distillate stockpiles are forecast to have increased in the week ended Sept. 26, while gasoline inventories probably fell, a preliminary Reuters survey of four analysts showed on Monday.
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