Oil posts best quarter since mid-2015 but glut still worries

Oil prices jumped more than 10 percent in March in the best quarter since mid-2015 although some analysts said the rally could fade soon as an output freeze plan by major crude exporters fails to alleviate worries of a glut.

A weak dollar and data showing a drawdown in crude stocks at the US futures delivery hub helped oil settle steady to firmer in Thursday's session. But traders remained worried that a tentative agreement among the world's largest producers to keep oil output at January's levels will barely make a dent on global supplies.

Analysts said crude futures also appear to have overextended gains with a 50 percent rally since the deal was proposed midFebruary, amid little improvement in fundamentals.

"Oversupply still persists due to resilient US production, even if declining moderately; high OPEC output, led by Saudi Arabia and Iraq; and the gradual return of Iran starting Q1 2016," said Mike Wittner, global head of oil research at Societe Generale. Brent crude for May delivery, which expired as the front-month contract, settled up 34 cents, or 0.8 percent, at $39.60 a barrel. June Brent closed 0.7 percent higher at $40.33. The benchmark's frontmonth soared 10 percent higher in March - its best month since April 2015 - and jumped 6 percent in the first quarter - its best quarter since the second quarter in 2015.U.S. crude futures settled at $38.34, up 2 cents on the day, rising 14 percent in March and 4 percent in the quarter - also its biggest quarterly gain since June 2015.

In a poll, oil analysts raised their average price forecasts for 2016 for the first time in 10 months - Brent averaging $40.90 and U.S. crude $39.70 in 2016 - but cautioned the rally could fade near term. On Thursday, the dollar hit a mid-October low, making greenback-denominated oil more attractive to holders of euro and other currencies.