Crude oil prices steady in thin Asian trading  

SINGAPORE: Crude oil futures steady in lacklustre trading on Friday as Asian liquidity faded ahead of the Lunar New Year holiday across large parts of the region.

International benchmark Brent crude futures were trading at $34.50 per barrel at 0426 GMT, up 4 cents from their last settlement. U.S. crude futures were up 8 cents at 31.80 a barrel.

Traders said liquidity was low due to the Lunar New Year holiday which will last for most of next week.

Oil prices have been extremely volatile since the start of the year, and in particular this week, as a string of bullish indicators like a slump in the dollar and potential talks on output cuts clashed with bearish reports of record U.S. crude inventories, higher output and a slowing global economy.

"Volatility should remain elevated with the trade-weighted U.S-dollar, headlines and macro concerns continuing to drive oil prices," Morgan Stanley said on Friday.

BMI Research, a unit of rating agency Fitch Group, said on Friday that "bloated crude inventories in the U.S. pose rising risk to WTI" and that "a continued build in storage over the coming six to eight weeks could collapse the price of WTI, driving a sharp reopening of the spread to Brent."

U.S. crude inventories climbed 7.8 million barrels in the week to Jan. 29 to 502.7 million barrels. Gasoline inventories rose to a record high, soaring 5.9 million barrels to 254.4 million barrels.

Brimming storage is contributing to an overall bearish market outlook as long as major producers don't reach an agreement on output, with China's economic slowdown now showing signs of spreading across the world.

Commodities brokerage Marex Spectron said that "the macroeconomic environment is bearish. Global industrial production, manufacturing and automotive demand indices all point towards weakening demand."

"Rebalancing will take longer, keeping prices low ... We see the low price regime persisting until 2Q17," Morgan Stanley said.