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Oil prices rose on Monday as futures traders bet the market may have bottomed after a recent steep fall, even as physical markets remain bloated by oversupply, especially from a relentless rise in US drilling.
Brent crude futures were trading at $48.41 per barrel at 0246 GMT, up 26 cents, or 0.5 per cent, from their last close.
US West Texas Intermediate (WTI) crude futures were at $46.07 per barrel, up 24 cents, or 0.5 per cent.
Traders said that the price rises came on the back of speculative traders upping their investment into crude futures, by taking on large volumes of long positions, which would profit from a further price rise.
The rise in new long positions comes after Brent and WTI crude futures have fallen by around 10 per cent below their opening levels on May 25, when an OPEC-led policy to cut oil output was extended to cover the first quarter of 2018 instead of expiring this June.
“Wall Street's oil bulls have reset for a technical bounce," said Stephen Schork, author of the Schork Report, which specialises in oil and gas market analysis.
While the financial market seems to have some confidence that prices may have bottomed out, the physical market remains bloated, especially due to a rise in US drilling for new oil production.
US energy firms added eight oil rigs in the week to June 9, bringing the total count up to 741, the most since April 2015, energy services firm Baker Hughes Inc had said on Friday.
This ongoing drive to find new oil has driven up US output by more than 10 percent since mid-2016, to over 9.3 million bpd, a figure the US Energy Information Administration (EIA) says will likely rise above 10 million bpd by next year, challenging top exporter Saudi Arabia.
Soaring US output threatens to undermine an effort led by the Organization of the Petroleum Exporting Countries to cut almost 1.8 million bpd of production until the first quarter of 2018 in order to tighten markets and prop up prices.
Despite this, Russian energy minister Alexander Novak had said on Sunday said on Sunday there was no need to review the agreement on reducing oil output as it was too early to make any decisions.
Russia, not a member of OPEC, is the world's biggest oil producer but it is participating in the production cuts.
Saudi energy minister Khalid Al-Falih made similar statements over the weekend.
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