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Oil markets steady as Japan emerges from recession

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February 16
2:01 AM 2015

Oil prices steadied on Monday as Japan's economy emerged from recession and as strong demand for refined products translated into healthy orders for crude.

Japan's economy rebounded from recession in the final quarter of last year, supporting oil prices, even though the data was weaker than expected.

Analysts said that healthy demand for refined products was also buoying crude markets.

"Crude oil has shown strength on the back of higher product prices," Barclays said on Monday in a note.

"Product markets have been supported by strong domestic demand, looming refinery turnarounds, and the potential impacts of the United Steelworkers union (USW) refinery strikes," it added.

Benchmark Brent crude futures were trading up 3 cents at $61.55 per barrel by 0620 GMT (1.12 a.m. EST). U.S. WTI crude was down 5 cents at $52.73 a barrel.

The steady prices follow strong gains made last week when oil markets rose 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 said.

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