Oil retreats after rally

Oil fell back on Friday from its three-day bull run, paring nearly $2 in morning trade, but otherwise remaining on course to end the month up more than 4% from January, its first monthly gain since June 2008.

OPEC production cuts and a bounce in U.S. demand for gasoline this week have pushed oil prices up, and analysts at JP Morgan said supply tightness meant "the crude market is finally in balance."

U.S. crude for April delivery was down 1.71 cents to $43.51 a barrel after closing at $45.22 on Thursday, a $2.72 jump.

"With the impact of OPEC production cuts clearly being felt in the markets, we anticipate continued bullishness in the coming week with refinery runs expected to rise sharply, resulting in a crude draw," JP Morgan analysts wrote in their Global Energy Strategy note.

OPEC has been implementing a 5% reduction in its share of global production since September, totaling 4.2 million barrels per day, in order to support falling oil prices.

Oil touched a record high of $147.27 in July, and in the course of six months fell more than $100 to $32.49 in December as the global economy shuddered into a rapid and deep recession.

Signs of recovery from the recession have been lacking, with leading industrialized and developing countries releasing economic data regularly that show slumping consumer demand, rising unemployment and frozen credit liquidity.

Geneva-based consultants Petrologistics track OPEC supply and earlier this week said the Organization of the Petroleum Exporting Countries are on track to deliver 89% compliance with the production cuts by the end of February.
Lightening gloom

A steep 3.4 million barrel drawdown in gasoline stocks announced earlier in the week sparked the rally that has lifted crude prices 13% in this week alone. NYMEX March RBOB registered its highest front-month settlement since November.

The United States will rack up the biggest budget deficit since World War Two, while jobless claims jumped to a record 5.1 million, and in Asia Japan factory output recorded a record monthly fall in January.

OPEC members continue to mull the possibility of another output cut at its meeting in March, with the United Arab Emirates cutting allocations for Asian refiners in April.

Venezuela said it wanted OPEC to agree on a new oil output cut, but relatively small member Ecuador said oil prices were stabilizing now, brushing off possibility it might urge a cut.

Market players are closely eyeing March heating oil and RBOB gasoline contracts that expire on Friday as well as key economic data, including euro zone January inflation and unemployment figures and U.S. fourth-quarter GDP.

The U.S. GDP figures are expected to show the world's largest economy had contracted at a 5.4% annual rate, the deepest slide since the first quarter of 1982.

U.S. durable goods orders, an important gauge of business activity, fell for a sixth month to a six-year low in January, suggesting that dried-up credit markets have had a severe impact on industries around the world.