By Julia Simon
NEW YORK (Reuters) - Oil prices were down more than half a percent after hitting a six-month low on Thursday, remaining under pressure from high global inventories and fears that OPEC's agreed production cuts cannot offset rising production elsewhere.
The dollar rose to its highest in more than two weeks, adding to the pressure on oil, as solid readings on the U.S. economy helped strengthen the case for the Federal Reserve to continue tightening monetary policy this year. A stronger dollar makes greenback-denominated oil more expensive for buyers in other currencies. [USD/]
Saudi Arabia's oil exports are expected to fall below 7 million barrels per day this summer, according to industry sources familiar with the matter, and Russian oil exports were seen as broadly flat in the third quarter, and yet prices continue to fall.
The market has not been able to sustain a rally since March, as efforts by the Organization of the Petroleum Exporting Countries and non-OPEC producer Russia to reduce supply have been met with higher output from Nigeria and Libya, who are exempt from the deal, along with the United States.
"I definitely think we're in a new trading range," said Tariq Zahir, crude trader and managing member at Tyche Capital Advisors in New York. "Unless you get some supply disruption, I think it's going to be lower for longer."
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Brent crude touched a low of $46.70 a barrel on Thursday, weakest since May 5 and just above six-month lows, before recovering. It was down 8 cents to $46.92 a barrel by 12:36 p.m. EDT (1636 GMT).
U.S. crude was down 21 cents at $44.52, after earlier touching a six-month low of $44.32 a barrel.
Crude prices fell nearly 4 percent on Wednesday, after U.S. gasoline inventories rose unexpectedly and the International Energy Agency said it expects supply to outpace demand in 2018 despite consumption hitting 100 million bpd for the first time.
U.S. gasoline inventories rose 2.1 million barrels last week, putting them 9 percent higher than their five-year average for this time of year, according to the U.S. Energy Information Administration (EIA).
"Yesterday's EIA numbers really come down to unleaded gasoline. For the second week in a row we've been seeing builds - we don't see that this time of year," said Tyche's Zahir, referring to the usual rise in demand for U.S. summer driving season.
Both benchmarks have given up all of the gains made since OPEC agreed to cut output to prop up prices late November.
OPEC's pledge was to cut 1.8 million bpd in tandem with other key producers, including Russia, for the first six months of the year. On May 25, they agreed to extend their cuts into March 2018.
Yet crude prices have fallen about 12 percent since that day.
U.S. production has is up 10 percent over the past year to 9.33 million bpd.
The EIA expects U.S. output to grow by 460,000 bpd in 2017, while OPEC forecasts U.S. production to increase by 800,000 bpd in 2017. [OPEC/M] [EIA/M]
(Additional reporting by Christopher Johnson in London, Henning Gloystein in Singapore; Editing by Marguerita Choy and Adrian Croft)