Oil turns lower as glut overshadows Japan’s return to growth

SINGAPORE – Oil prices turned lower on Monday after a firm start, with an oversupply continuing to weigh on the market despite data showing Japan had pulled out of recession.

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, 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.