Oil prices steady after sharp fall, China's imports surge

By Henning Gloystein

SINGAPORE (Reuters) - Oil prices stabilised on Friday, following a steep fall in the previous session, as the demand outlook in Asia remained healthy despite slowing economic growth.

Oil prices tumbled 3 percent on Thursday as a resurgent dollar erased gains from the past two sessions, and after some U.S. producers said they would ramp up drilling after months of falling activity if prices continued to rise.

Healthy Asian demand data, however, helped stabilise prices on Friday.

China imported 30.29 million tonnes of crude oil in April (222 million barrels), up 13.0 percent from 26.81 million tonnes in the previous month, although its exports, denominated in yuan, fell 6.2 percent in April from a year earlier.

Thomson Reuters Oil Research and Forecasts said early indicators showed that seaborne crude flows into Asia would be around 80-82 million metric tonnes (586-601 million barrels) in May, broadly steady with April.

The healthy demand figures helped stabilize oil prices after a fall in the previous session.

Benchmark Brent crude was at $65.60 per barrel at 0239 GMT, up 6 cents, while U.S. crude was 10 cents lower at $58.84.

On Thursday, prices tumbled 3 percent as a resurgent dollar erased gains from the past two sessions, and after some U.S. producers said they would ramp up drilling after months of falling activity if prices continued to rise.

Brent prices have risen by 40 percent since the beginning of the year,

Analysts said that Brent seemed capped around $70 a barrel, and may be overvalued already as there was still an oversupply in crude and U.S. producers, which have sharply reduced drilling in recent months of low prices, could increase production.

"U.S. producers... indicated they would ramp up drilling activity if prices continued to rise," ANZ bank said in a note.

HSBC questioned the economics of oil's 40 percent price rise since January.

"It's a little confounding that the stuff has again gotten more expensive, with Brent now closing in on $70 per barrel," the bank said in a note. "After all, the global economy last quarter probably grew at its slowest pace since the Great Recession."

Credit Suisse said that oil's technical indicators were also weak as unusually large speculative net long positions had appeared in oil markets while new shorts had also emerged recently.

"From a positioning perspective alone, a price correction could easily be exacerbated and turn into a rout," it added.

(Editing by Richard Pullin)