* Dollar extends gains vs basket of currencies
* Saudi Arabia expected to cut export prices
* UAE says market is well supplied
* Coming up: U.S. inventory report from API at 2130 GMT
(Adds quotes, Saudi pricing outlook, updates prices)
By Jo Winterbottom
LONDON, March 2 (Reuters) - Oil edged 0.2 percent lower to
around $78.50 on Tuesday, flagging in the face of a dollar
favoured by investors worried over European sovereign risk and
pressured by forecasts of rising U.S. crude and gasoline stocks.
The euro hit a 9-1/2 month low against the dollar on
Tuesday, under selling pressure due to concerns about Greece's
debt problems. []
Also on the mind for the market are weekly inventory data
from industry group the American Petroleum Institute (API), due
to be published later on Tuesday, followed by U.S. government
statistics on Wednesday.
U.S. crude for April delivery <CLc1> eased 15 cents to
$78.55 a barrel by 1022 GMT, while London ICE Brent <LCOc1> was
down 7 cents to $76.82.
The U.S. crude futures contract for April touched $80.62 on
Monday, its highest since Jan. 13, tracking commodity gains led
by copper. But prices retreated after the dollar gained 0.65
percent against a basket of currencies.
On Tuesday, the dollar gained a further 0.41 percent.
"The dollar is the big driver, and if it continues to rally,
I do expect crude to go lower," said Clarence Chu, an energy
trader at Hudson Capital Energy in Singapore.
U.S. crude inventories probably rose 1.3 million barrels
last week amid higher imports, a Reuters survey showed, while
gasoline stockpiles may have gained 400,000 barrels. []
RANGES AND RESISTANCE
Increasingly, $80.50 is looking quite a hurdle for U.S.
crude April futures, analysts said.
"Technically the congestion of WTI between $78 and $80 per
barrel was confirmed yesterday. $80.50 per barrel was confirmed
as the point of resistance and with some continued overnight
pressure on WTI $78 will have to prove that it can be as strong
a level of support," Olivier Jakob at Petromatrix wrote.
Crude oil markets continue to be well supplied, United Arab
Emirates oil minister Mohammed al-Hamli said on Tuesday.
He added that prices between $70-80 per barrel were
acceptable to producers. "Oil price stability has been achieved
despite weakness in the global economy and unfavourable market
conditions," he added.
OPEC meets next on March 17 and ministers are already
suggesting there will be no change to current output quotas.
[]
Top oil exporter Saudi Arabia is likely to cut the price of
all types of crude heading to export because of competition from
Russia's export blend and falling profit margins for fuel oil
sales, traders said.
The market is still absorbing the impact since January of
Russia's ESPO blend crude into the Asia-Pacific market, where
Chinese, South Korean and Japanese refiners have bought the new
crude. The grade competes with Saudi Arabia's main export grade,
Arab Light. []
The market could find support from demand for products out
of Chile after Saturday's earthquake damaged its Aconcagua and
Bio Bio refineries, with a combined capacity of 220,000 barrels
per day.
(Additional reporting by Alejandro Barbajosa in Singapore;
editing by James Jukwey)
