Beleaguered crude ends grim quarter with worst drop in 2 years

World oil prices tumbled to their lowest in more than two years on Tuesday, with U.S. crude posting its biggest daily decline since 2012 as expiring October gasoline futures tumbled 4.5 percent and the U.S. dollar rose.

New York RBOB gasoline for October delivery, which expires at the end of the day, reversed more than half of its gains from a two-week rally that traders had attributed to a short squeeze on local supplies.

That selloff contributed to a more than $3 slump in U.S. crude and deepened losses in European benchmark Brent, both of which tumbled abruptly at midday. Brent was set for its biggest quarterly fall in two years, down 16 percent.

Many brokers said oil prices were also pressured by the U.S. dollar's surge to a four-year high against a basket of currencies, and a two-year high against the euro. Oil traders said other factors that may have contributed to the decline included end-quarter position squaring by funds or further possible oil hedging from Mexico.

Brent crude for November delivery was down nearly $3 to under $95 per barrel. It has lost nearly 14 percent in the third quarter, its biggest quarterly drop since April-June 2012. U.S. crude, pressured by lackluster economic data, swooned by $3.41 to end at $91.16 a barrel. The contract dropped more than 3 percent, its worst one-day slide since November 2012.

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Brent has slumped since June, when it hit this year's high of $115.71. Ample global supply, a strong dollar and lackluster 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.

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. Strong production from the United States has also dented crude prices.

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.

The market awaited weekly oil data from the American Petroleum Institute on Tuesday. U.S. crude and distillate stockpiles were forecast to have increased in the week ended Sept. 26, while gasoline inventories probably fell, a Reuters poll showed on Monday.