Oil edges up from two-week lows but gains limited

By Aaron Sheldrick

TOKYO (Reuters) - U.S. oil prices edged up on Friday, snapping three days of declines, but gains were limited as Asian share markets extended a selloff on Wall Street after news of planned U.S. tariffs on steel and aluminium raised fears of a trade war.

President Donald Trump announced he would impose hefty tariffs on the two metals to protect U.S. producers, risking retaliation from major trade partners like China, Europe and neighbouring Canada.

U.S. West Texas Intermediate (WTI) crude was up 5 cents, or 0.1 percent, at $61.04 by 0233 GMT after touching a two-week low of $60.18 a day earlier.

Global benchmark Brent was up 9 cents, or 0.1 percent, at $63.92, having settled down 1.4 percent on Thursday, also a two-week low, and is set for a weekly fall of about 5 percent.

U.S. crude is on track for a 4 percent drop this week, its first weekly decline in three, having given up much of the gains in recent weeks when sentiment was boosted by a fall in stocks at the Cushing delivery point for WTI.

"Although destocking in Cushing has continued, with stocks there falling below 30 million barrels for the first time since late 2014, the overall increase in U.S. oil stocks has overshadowed the good news," Fawad Razaqzada, market analyst at Forex.com, said in a note.

Stocks continued to fall at Cushing in Oklahoma, with inventories down by 1.2 million barrels, the 10th consecutive week of declines, the Energy Information Administration said this week.

However, total U.S. crude stocks rose last week even as refineries hiked output, increasing by 3 million barrels, compared with expectations for an increase of 2.1 million barrels.

The Organization of the Petroleum Exporting Countries (OPEC) will hold a dinner on Monday in Houston with U.S. shale firms, the latest sign of the producer group widening talks about how best to tame a global oil glut.

U.S. crude output slipped in the last month of 2017, but in November hit an all-time high of 10.057 million barrels per day (bpd). Weekly data showed another record and further gains are expected.

Fawad said the market has been ignoring "good compliance with the production cuts by OPEC and non-OPEC countries".

A Reuters survey on Wednesday found OPEC production fell in February to a 10-month low.

Still, "OPEC will not be able to keep its production agreement with other non-OPEC members for too long should the U.S. continue to win more market share," he said.

(Reporting by Aaron Sheldrick; editing by Richard Pullin)