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US oil settles down 44 cents, or 0.7%, at $59.52 a barrel

Rusted out 'pump-jacks' in the oil town of Luling, Texas.
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Rusted out 'pump-jacks' in the oil town of Luling, Texas.

Oil prices fell on Monday as the Greek debt crisis helped boost the dollar, making fuel more expensive to holders of other currencies, and as United Nations talks offered a chance for peace in Yemen where crude exporter Saudi Arabia is involved in a civil war.

U.S. light crude oil, also known as West Texas Intermediate (WTI), closed down 44 cents, or 0.7 percent, at $59.52 a barrel. Brent crude fell $1.30, or about 2 percent, to $62.60 a barrel.

Warplanes from a Saudi-led coalition bombarded Yemen's capital Sanaa overnight, a Reuters witness said, as warring factions prepared for talks due to start in Geneva on Monday.

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Investors are increasingly concerned about surplus supply in the global oil market with the Organization of the Petroleum Exporting Countries pumping around 2 million barrels per day (bpd) more than needed, according to most industry estimates.

Production has been increasing in top OPEC exporters Saudi Arabia and Iraq, and a deal with Iran over its nuclear program may soon lift sanctions on the Islamic Republic, allowing it to increase oil exports.

Output is also increasing in Libya, where production has been constrained by civil war.

"Sentiment this morning gets a bearish touch from negative equities, a dollar to the strong side, Greek concerns and news of some increase in Libya oil production," said Bjarne Schieldrop, chief commodities analyst at SEB Markets in Oslo.

Schieldrop said world oil demand was increasing, but that might not be enough to soak up a global oil supply glut.

"It (oil demand) is probably not strong enough to cover this gap. The market thus continues to run a surplus," he said.

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Brent has fallen from a high above $66 last week and appears to be settling into a range between $60 and $65, said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt.

"There's a good possibility that we will test the lower end of this range this week," Fritsch said.

"The market is oversupplied and output continues to rise slowly, so oil prices should stay under pressure."