Oil retreats, set to become worst-performing asset in 1Q

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NEW YORK (March 31): Oil prices fell on Friday after a three-day rally ran out of steam, as investors waited for US rig count data that could provide further evidence that US production is continuing to grow, contributing to a global oil glut.

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 effective or that US production is continuing to offset efforts to rebalance the market.

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

Brent futures were down 38 cents at US$52.58 a barrel by 11:14 a.m. EST (1514 GMT). The contracts have lost around 7 percent since the previous quarter, the worst quarterly losses since late 2015.

US crude futures were down 15 cents at US$50.20 a barrel after slipping back below US$50. They too are on track to end the quarter around 7 percent lower, also the worst quarterly losses since late 2015.

Oil prices had gained momentum this week on a growing sense that OPEC and non-member Russia would extend their production cut, seeking to drive the market higher.

"There's resistence at US$52 to US$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.

Later on Friday, energy services firm Baker Hughes will publish weekly US oil rig figures. The indicator has shown huge gains, with the rig count doubling in a 10-month recovery and undermining efforts led by the Organization of the Petroleum Exporting Countries to rein in output.

"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.

"The expected rise in the US rig count later today provides some arguments to sell at last."

OPEC and non-OPEC producers including Russia agreed late last year to cut output by almost 1.8 million barrels per day in the first half of 2017 to rein in a global supply overhang and prop up prices.

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