Oil prices dip as worries over U.S. oversupply drag

By Henning Gloystein

SINGAPORE (Reuters) - Oil prices dipped on Monday on worries about oversupply in North America, with Brent futures testing support around $60 a barrel and U.S. contracts hovering around $50.70.

After an initial rise on Monday along with global markets on optimism that another euro zone crisis over Greek debt had been averted for now, prices began dipping as analysts said crude markets remained oversupplied, especially in the United States, where inventories are at record highs.

Benchmark U.S. WTI crude futures were trading down 9 cents at $50.72 a barrel by 0745 GMT. Brent crude was trading 5 cents lower at $60.17.

Several banks on Monday said they expected prices to keep falling.

"We expect prices to head back below $50/bbl in the coming weeks, with a target of $43/bbl over the next 2-3 months," ANZ said. Barclays also said the market would weaken again in the near future.

Morgan Stanley warned U.S. crude stocks were set to build through May. "Similar to last year, growing U.S. and Canadian production combined with refinery maintenance and an only marginal decline in imports is to blame," it said.

Oil prices began tumbling in June 2014 as traders reacted to a growing glut, but prices have picked up since mid-January with Brent jumping almost $20 a barrel to touch $63 a barrel last week as traders closed long-standing short positions in reaction to a falling U.S. rig count.

U.S. drilling has slowed since the beginning of the year as producers react to the collapse in oil prices, but Goldman Sachs said the pace of the U.S. rig count decline was now slowing.

U.S. oil production growth is expected to reach 440,000 barrels per day by the fourth quarter of 2015 compared with a year before, based on the current rig count, Goldman Sachs said in a note.

Analysts said that a cold spell in the Unites States, which has hit refinery output, could also prevent crude prices from rising further.

Major U.S. East Coast refineries have been hit by cold weather, sending up heating oil futures on fears of tight supplies.

"Since the amount of crude oil being refined is less than usual, we would be seeing excess crude oil in the U.S. market ... This causes crude oil to decrease in price while refined products increase in price," Phillip Futures said.

(Editing by Joseph Radford and Alan Raybould)