Oil settles at $50.60, falling 5.8% in Q1 as US supply concern offsets OPEC cuts

Lucy Nicholson | Reuters

Oil prices were mixed on Friday after a three-day rally ran out of steam, teeing up the oil market's worst-performing quarter since 2015 as investors fret that growing U.S. supplies are undermining OPEC-led production cuts.

The first quarter has seen prices locked within a range as traders have searched for signals that the Organization of the Petroleum Exporting Countries' production cuts are rebalancing the market.

Brent crude futures have made some of the biggest losses across global asset classes this quarter. In March, the contracts posted the biggest monthly losses since July as growing U.S. crude inventories and drilling activity counterbalanced production cuts elsewhere in the world.

On Friday, were down 22 cents at $52.74 a barrel by 2:40 p.m. ET (1840 GMT). The contracts have lost about 7 percent since the previous quarter, the worst quarterly losses since late 2015.

U.S. crude futures settled 25 cents, or half a percent, higher at $50.60 a barrel on the day, but ended the quarter 5.8 percent lower.

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"I wouldn't be surprised to see some profit-taking ahead of the weekend after the strong gains in recent days," said Carsten Fritsch, commodity analyst at Commerzbank.

Energy services firm Baker Hughes weekly count of U.S. oil rig rose for an eleventh straight week and posted the best quarter for rig additions since 2011. The number of rigs operating in U.S. fields rose by 10 to a total of 662, compared with 362 at this time last year.

The indicator has shown huge gains, with the rig count doubling in a ten-month recovery and undermining efforts led by OPEC to rein in output.

Oil prices had gained momentum earlier this week on the back of growing sense that OPEC and non-OPEC oil production giant Russia would agree to continue their production cut deal seeking to drive prices higher.

"There's resistence at $52 to $53 a barrel," said Tony Headrick, energy market analyst CHS Hedging. Additionally, the WTI-Brent spread, which has widened, is narrowing slightly after exports picked up last week, he said.

OPEC and non-OPEC producers including Russia agreed late last year to cut output by almost 1.8 million barrels per day (bpd) during the first half of the year in order to rein in a global supply overhang and prop up prices.

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Nevertheless, analysts polled on a monthly basis by Reuters have slightly lowered their oil price expectations for this year.

They expect Brent crude prices to average $57.25 a barrel this year, down from $57.52 expected last month, while WTI predictions averaged at $55.29 a barrel, down from $55.66.

There were oil supply developments in Nigeria and Libya, the two OPEC members exempt from cutting production.

The Nigerian subsidiary of Royal Dutch Shell said it had shut down one of two lines that carries Bonny Light crude oil to an export terminal in order to remove theft points.

Exports of roughly 232,000 barrels per day (bpd) were planned in April, according to loading programs, but it was not immediately clear how much of this would be impacted by the pipeline shutdown. Shell declined to comment on the impact of the pipeline outage on its operations, but oil traders said the loading programs were so far not affected.

Oil production in Libya has fallen more than 250,000 barrels per day (bpd) this week as output from its western oilfields of Sharara and Wafa has been blocked by armed protesters.

— CNBC's Tom DiChristopher contributed to this report.