Crude oil prices edged down on Friday, set for their first weekly decline in more than a month as concerns over a global supply glut outweighed strong Chinese crude imports.
Benchmark Brent crude was at $65.44 per barrel at 0915 GMT, 10 cents lower after hitting a session high of $66.01. U.S. crude was 8 cents lower at $58.86 a barrel.
Brent was more than $4 below the 2015 peak reached earlier in the week, hit by a resurgent dollar and signals that some U.S. producers would ramp up drilling if prices continued to rise.
Analysts said Brent seemed capped around $70, and may already be overvalued as oversupply continued and U.S. producers, which have sharply reduced drilling in recent months of low prices, could increase production.
"The small drop in U.S. production in recent weeks certainly does not justify the 30-40 percent price increase" since January, said Hans van Cleef, senior energy economist with ABN AMRO.
"The oil market is still very much supply-driven, and in the end, we face a huge oversupply."
Prices had initially stabilized on Friday on healthy Asian demand data, and received a boost later in the day as other financial markets rose on the back of an unexpectedly decisive election victory for Britain's ruling Conservative Party.
But observers such as Credit Suisse said oil's technical indicators were 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 said.
Markets are also watching for U.S. nonfarm payrolls data due later in the day, as another weak reading could deepen worries that the U.S. economy may not be gathering momentum. [MKTS/GLOB]
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.
Analysts cautioned that the figure could be a sign of a stock build in the world's second-largest oil consumer, where strategic petroleum reserves are reportedly close to capacity.
"Given that crude runs have likely fallen in April on the back of maintenance, we are looking at yet another quite sizeable implied stock build that according to our estimates could come in north of 1 million barrels per day," analysts JBC said in a note.
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