U.S. crude slumps 4 percent on dollar rally, glut warning

NEW YORK (Reuters) - Oil prices fell on Friday, with U.S. crude down nearly 4 percent and Brent off 2 percent, pressured by a rallying dollar and renewed warnings of an oil glut by the global energy watchdog.

A weaker U.S. stock market <.SPX> also weighed on oil, adding to worries in earlier trade of Iran reaching a partial nuclear deal with world powers by end March and a full agreement by June that would end sanctions against the OPEC nation and flood the market with even more crude exports.

Brent crude fell $1.12, or 2 percent, to $55.90 a barrel by 11:38 a.m. EDT, after hitting a one-month low at $55.86.

U.S. crude fell almost 4 percent, or $1.70, to $45.35, the lowest since Jan. 30.

With U.S. crude falling faster than Brent, the spread between the benchmarks, one of the biggest volume trades in oil, widened 75 cents to $10.80 a barrel, its widest in 10 days.

The dollar rose again after Thursday's pause, eyeing for parity with the euro . A stronger dollar makes dollar-denominated commodities, such as oil, costlier for holders of other currencies.

The International Energy Agency, which advises industrialised countries on energy, warned that a global oil glut was building and the United States may soon run out of empty tanks to store crude.

"U.S. supply so far shows precious little sign of slowing down," the IEA said. "Quite to the contrary, it continues to defy expectations."

While OPEC output declined in February, global supply was up by 1.3 million barrels per day (bpd) year-on-year at 94 million bpd, led by a 1.4 million bpd non-OPEC increase, the IEA said.

(Additional reporting by Christopher Johnson in London and Keith Wallis in Singapore; Editing by Marguerita Choy)

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