US Crude Outlook - Diffs supported by refinery strike

* Dollar strength factor remains in focus

* European refinery strike supporting U.S. margins

NEW YORK, Oct 18 (Reuters) - U.S. cash crude differentials
will find support from Europe's ongoing oil refinery strikes as
global gasoline and diesel buyers look to the United States to
replace supplies lost from the diminished output and rapidly
dwindling stocks, traders and brokers said on Monday.

But the dollar remained a key factor in the price of oil
and the impact of a rising dollar on prices cannot be
discounted, traders said.

"I would expect some consolidation and downward pressure on
oil/futures prices early this week as the dollar pauses and
claws back some of its luster -- not much though -- because the
trade is not certain of the amount of QE2." said Carl Holland
of Connecticut-based Energy Trading Solutions.

U.S. Federal Reserve Chairman Ben Bernanke signaled on
Friday that the U.S. central bank would loosen monetary policy
further in a debt purchase program described as a second round
of quantitative easing, or QE2, but gave no details.

On futures markets, November WTI CLX0 rose $1.42 to
$82.67 a barrel at midday, while the dollar was flat against
the euro at about $1.3897. FOREX.

Cash prices were seen flat to unchanged with WTS seen
trading several times at 2.50 cents under the November crude
oil screen, in range with Friday's level.

In Europe, Forties crude oil differentials hit their lowest
levels in almost 20 weeks as increasing North Sea supplies
competed for fewer buyers as the French strike cut demand.

Brent crude futures held a premium to WTI futures, but the
spread was seen moving up, holding at 50 cents at midday from
the 61 cents on Friday CL-LCO1=R.

Weaker front-month WTI against either second-month WTI or
the North Sea benchmark tends to strengthen grades, which
deliver against second-month WTI and compete with Brent.

U.S. refined product margins were mixed last week, with the
heavily import-dependent Northeast region reaping the reward
from the European strike, according to a weekly report from
Credit Suisse Monday. [ID:nN18271835]

Gasoline and distillate demand has been slow to rise amid
the recovering economy but has been steady enough to keep
refinery margins above last year's levels and keep refiners
buying.

(Reporting by Janet McGurty)