Brent up, U.S. crude down as oil rally comes into question

NEW YORK (Reuters) - Brent (brent.167)rebounded from Friday's early weakness while U.S. crude held to losses as traders and investors debated whether oil's rally over the past month and a half should continue amid stubbornly high supplies.

Futures of North Sea Brent have rallied nearly 20 percent since the end of March, while U.S. crude futures have risen almost 30 percent.

But crude inventories in the United States alone remain near 80-year highs despite a pick up in demand for gasoline and a drop lately in stockpiles.

On Friday, data showed the number of U.S. rigs drilling for oil fell just by 8 this week, the least since December, after declines numbering in the dozens recently. [RIG/U]

To some, the drilling figures suggest a market that has overshot and is about to correct.

"A mood change is in the air," Eugen Weinberg, global head of oil and commodities research at Commerzbank in Frankfurt, told the Reuters Global Oil Forum. "The oil price rally looks like it may be slowly running of steam."

U.S. crude was down 40 cents at $59.47 a barrel by 1:50 p.m. EDT, having fallen more than $1 earlier as a stronger dollar pulled down commodities denominated in the currency. For the week, though, U.S. crude was on track to a ninth straight week of gains.

Brent , the more important global oil benchmark, was up 5 cents at $66.75 a barrel, also dropping more than $1 earlier in the session.

In the oil products markets, gasoline was down while heating oil rebounded from broad losses earlier in the session.

The International Energy Agency said OPEC is pumping at least 2 million barrels per day (bpd) more than required. [IEA/M] [OPEC/M]

The U.S. Energy Information Administration said world stocks are rising at 1.95 million bpd this quarter and will build at least through 2016. [EIA/M]

U.S. demand for fuel is likely to pick up in the second half while global production runs well ahead of consumption. Without a major, unexpected disruption, the glut will stay, analysts say.

"Sure, U.S. gasoline demand has been strong, but we still have almost 485 million barrels in crude inventories. That's a ton in supply," said Chris Jarvis at Caprock Risk Management in Frederick, Maryland.

(Additional reporting by Christopher Johnson in London and Florence Tan in Singapore; editing by William Hardy, David Goodman, Ted Botha and Meredith Mazzilli)