By Trixie Yap

(Reuters) -Oil prices slipped in early trade on Thursday, reversing most of the previous session’s gains on a stronger dollar and worries of higher global output amid slow demand growth forecasts.

futures fell 45 cents, or 0.6%, to $71.83 a barrel by 0726 GMT. U.S. West Texas Intermediate crude (WTI) futures declined 48 cents, or 0.7%, to $67.95.

“The primary driver of oil prices, both in the near term and looking ahead, will be the direction of the U.S. dollar,” said Phillip Nova’s investment analyst Danish Lim, adding that supply and demand dynamics had put pressure on prices recently.

The dollar’s recent rally has been a key downside pressure, said Lim, who expects oil markets to stay volatile, although with a bearish bias.

The U.S. dollar surged to a one-year high, extending gains from Wednesday’s seven-month high against major currencies after data showed U.S. inflation in October increased in line with expectations.

This, in turn, stoked worries of slowing demand in the United States.

The market is “a concoction of weak demand factors”, with the latest worry being a rally in U.S. 10-year treasury yields and a surge in the 10-year breakeven inflation rate to 2.35%, said OANDA senior market analyst Kelvin Wong.

“(This) increases the odds of a shallow Fed interest rate cut cycle heading into 2025 (and) overall, there is less liquidity to stoke an increase in demand for oil,” he added.

On the supply and demand front, the U.S. Energy Information Administration has slightly raised its expectation of U.S. oil output to an average of 13.23 million barrels per day this year, or 300,000 bpd higher than last year’s record 12.93 million bpd, and up from an earlier forecast of 13.22 million bpd.

The agency also raised its global oil output forecast for 2024 to 102.6 million bpd, from a prior forecast of 102.5 million bpd. For 2025, it expects world output of 104.7 million bpd in 2025, up from 104.5 million bpd previously.

The EIA’s oil demand growth forecasts are weaker than OPEC’s, at about 1 million bpd in 2024, although that is up from its prior forecast of about 900,000 bpd.

The International Energy Agency’s oil market report is due later in the day.

There are few supply-demand factors supporting bullish oil markets currently, amid the slowing demand in China, said independent analyst Tina Teng.

Markets were still digesting the possible impact of Donald Trump’s U.S. presidential election win on oil prices, some analysts said.

“While there is probably limited near term impact, the potential of friendlier Middle East ties and OPEC+ putting back production, a decline in geopolitical risks and overall easier drilling environment in the U.S. all puts a cap on oil price sentiment,” said DBS Bank energy team sector lead Suvro Sarkar.

There are few supply-demand factors supporting bullish oil markets now with Trump’s win potentially slowing world economic growth and dampening demand in China, said independent analyst Tina Teng.