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Prices initially rose in early Asian trade but
then dipped as the return to growth in Japan in the
October-December quarter was weaker than expected, while a drop
in the number of rigs drilling in the United States did not
change the view that oil markets remained oversupplied.
In Japan, household and corporate spending disappointed,
underlining the challenge premier Shinzo Abe faces in shaking
off decades of stagnation.
Benchmark Brent crude futures were trading at $61.24 per barrel
at 0801 GMT (3 a.m. EST), down 28 cents since their last
settlement. U.S. WTI crude was down 26 cents at $52.52 a barrel.
The dip was also a reaction to strong gains made last week when
oil markets rose strongly after another drop in the U.S. rig
count, pushing Brent back above $60 a barrel for the first time
since December.
Despite the price rises of the past two weeks, analysts say
significant oversupply remains in oil markets as output stays
high while demand is relatively low.
"We continue to believe that neither supply nor demand will
respond materially near-term. On our estimates, global supply is
running 1.4 million barrels per day above global demand in 1H15,
up from 0.9 in 4Q14," Bank of America Merrill Lynch said late on
Friday in a statement.
"Thus inventory dynamics could continue to deteriorate in coming
weeks, leading to downside pressure on near-dated contracts. We
reiterate our view that Brent will trade below $40 per barrel
over the next two months," it added.
(Editing by Joseph Radford, Alan Raybould and Anupama Dwivedi)
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