Oil retreats, set to become 1st qtr's worst-performing asset

By Jessica Resnick-Ault

NEW YORK (Reuters) - Oil prices fell on Friday after a three-day rally ran out of steam, as the U.S. rig count rose, signaling that production from shale is rising further, contributing to the global oil glut.

Prices have been locked within a range during the first quarter as traders searched for signals that the Organization of the Petroleum Exporting Countries' production cuts are effective or that U.S. 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 U.S. crude inventories and drilling activity counterbalanced production cuts elsewhere in the world.

Brent futures were down 31 cents at $52.65 a barrel by 1:07 p.m. EDT (1707 GMT). The contracts have lost around 7 percent since the previous quarter, the worst quarterly losses since late 2015.

U.S. crude futures were up slightly, rising 5 cents to $50.42 a barrel after slipping back below $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 nonmember Russia would extend their production cut, seeking to drive the market higher.

"There's resistance at $52 to $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.

Energy services firm Baker Hughes said U.S. oil rigs increased by 10 to 662 in the week, making the first quarter the strongest for oil rig additions since mid-2011. [RIG/U]

The indicator has shown huge gains, with the rig count doubling in a 10-month recovery and undermining efforts led by OPEC 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.

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 ease 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.

(Additional reporting by Henning Gloystein in Singapore and Karolin Schaps in London; Editing by Chizu Nomiyama and Matthew Lewis)