UPDATE 2-Oil prices pulled down by surging output, but Iran sanctions loom

* Output from Russia, USA and Saudi Arabia has surged

* Top 3 crude oil production: https://tmsnrt.rs/2Rua0R8

* Brent and WTI have fallen by more than 10 pct since October

* Saudi Arabia expected to cut crude prices to Asia

* But U.S. sanctions against Iran to start next week (Adds expected Saudi crude price cut, Goldman Sachs outlook)

SINGAPORE, Nov 2 (Reuters) - Oil prices fell on Friday as surging output by the world's three largest producers outweighed supply concerns from the start of U.S. sanctions next week against Iran's petroleum exports.

Front-month Brent crude futures were at $72.56 per barrel at 0109 GMT on Friday, down 33 cents, or 0.5 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were down 26 cents, or 0.4 percent, at $63.43 a barrel.

"Crude oil prices took a severe hit as investors were unnerved on rising global inventories and record high output in 2018," said Benjamin Lu of brokerage Phillip Futures.

Brent has fallen by over 12 percent since the beginning of October, while WTI has lost more than 13 percent in value.

The downward pressure on oil is also visible in the physical market, where top exporter Saudi Arabia is expected to cut crude prices for December cargoes amid higher supply and a glut in refined products that has eroded refinery profits.

The Organization of the Petroleum Exporting Countries (OPEC) boosted oil production in October to 33.31 million barrels per day (bpd), a Reuters survey found this week.

That is up 390,000 bpd from September and the highest by OPEC since December 2016.

U.S. crude production surged by 416,000 bpd to a record 11.35 million bpd in August, the U.S. Energy Information Administration (EIA) said in a monthly report this week.

On a weekly basis, U.S. crude production <C-OUT-T-EIA> stood at 11.2 million bpd last week.

The United States is now running neck and neck with Russia for the title of top producer. Russian oil production has risen to a post-Soviet record high of 11.41 million bpd in October, up from 11.36 million bpd in September.

With Saudi Arabia pumping 10.65 million bpd in October, combined output from the top-three oil producers is at a record 33.41 million bpd, meaning that Russia, the United States and Saudi Arabia meet more than a third of the world's almost 100 million bpd of consumption.

IRAN SANCTIONS

Despite surging output, concerns lingered ahead of the start of U.S. sanctions against Iran's petroleum exports from next week.

Iran's biggest oil customers, all in Asia, are seeking sanction waivers.

"Potential waivers appear targeted at India and South Korea, and they require some reductions over current import volumes while still allowing oil to flow," said Clayton Allen of Height Securities.

"We think Trump will agree to China importing some volumes, similar to the treatment that India and South Korea receive," he said.

Japan is seeking a similar deal.

Despite these efforts, analysts said any potential Iranian oil sanction waivers would likely only be temporary.

"The U.S. may use waivers to slow-walk implementation, but these will not apply indefinitely," he added.

Goldman Sachs said it expects Iran's crude oil exports to fall to 1.15 million bpd by the end of the year, down from around 2.5 million bpd in mid-2018.

"We still expect that the global oil market will be in deficit in 4Q18," the U.S. bank said.

By the end of 2019, however, Goldman expects Brent to fall to $65 a barrel, largely due to "the unleashing of Permian (U.S. shale) supply growth once new pipelines come online."

(Reporting by Henning Gloystein; editing by Richard Pullin and Christian Schmollinger)