By Keith Wallis
SINGAPORE (Reuters) – Oil futures fell in Asian trade on Friday as oversupply, a strengthening dollar and falls in regional stock markets all weighed on sentiment. But another fall in U.S. oil output in January helped to limit the losses.
Brent crude for June delivery (LCOc1) fell 46 cents to $ 39.87 a barrel as of 0549 GMT. The May contract, which expired on Thursday, settled up 34 cents at $ 39.60 a barrel.
Brent jumped 6 percent in the first quarter, its first quarterly increase since rising 15 percent in the second quarter of 2015.
Front month U.S. crude futures (CLc1) dropped 50 cents to $ 37.84 a barrel after settling up 2 cents in the previous session. The U.S. benchmark rose 4 percent over January-March, also its first quarterly gain since surging nearly 25 percent in the second quarter of last year.
Still, prices have recently pulled back on low trading volumes, concerns about oversupply ahead of an oil producers’ meeting in Doha to agree a possible output freeze on April 17, and a firmer dollar, said Michael McCarthy, chief market strategist at Sydney’s CMC Markets.
“There is very little bullishness,” he said.
The dollar index (.DXY) rose in trading on Friday, rebounding from a mid-October low hit in the previous session.
A stronger greenback makes dollar-denominated commodities including oil more expensive for holders of other currencies.
Asian oil investors showed little reaction to the release of manufacturing data from China on Friday which showed an unexpected expansion in March, the first in nine months.
“The lack of reaction is a bit perplexing. I think the lead will come out of the U.S.,” said Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance.
China’s official Purchasing Managers’ Index (PMI) rose to 50.2 in March, up from February’s 49, showing a mild expansion in output and new orders that would normally underpin oil demand.
U.S. nonfarm payroll data, to be released later on Friday, will also give direction to oil prices, Barratt said.
Falls in Asian stock markets put further pressure on oil prices, Barratt said.
China’s blue-chip CSI300 index and the Shanghai Composite Index (.SSEC) both fell by around 1.5 percent, while Hong Kong’s Hang Seng index (.HSI) dropped 1.3 percent. Australia’s S&P/ASX 200 index (.AXJO) shed 1.6 percent.
But cuts in U.S. crude oil output, which fell for the fourth straight month in January, were helping to support prices on Friday, McCarthy said.
Oil markets would not get back into balance until the some of the overhanging supply is cleared, he added.
U.S. oil output fell by 56,000 barrels per day (bpd) to 9.179 million bpd in January, the fourth consecutive month oil production had fallen and the lowest level since October 2014, according to monthly data from the U.S. Energy Information Administration.
(Reporting by Keith Wallis; Editing by Richard Pullin and Tom Hogue)
