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[SINGAPORE] Oil prices recovered some ground on Thursday on strong demand in the United States, but analysts cautioned that oversupply would continue to drag on markets after a steep fall in the previous session.
Brent crude futures were trading up 34 cents, or 0.7 per cent, at US$48.13 per barrel by 0513 GMT.
US West Texas Intermediate (WTI) crude futures were up 32 cents, or 0.7 per cent, at US$45.45 per barrel.
The gains reflected firm fuel demand in the United States, where data from the American Petroleum Institute (API) on Wednesday showed that US crude inventories fell by 5.8 million barrels in the week to June 30 to 503.7 million. "Prices have managed to recover ever so slightly after API released its inventory data which showed US crude inventories falling," said Sukrit Vijayakar, director of energy consultancy Trifecta.
However, overall market conditions remain weak.
Prices tumbled about 4 per cent on Wednesday on rising exports by the Organization of the Petroleum Exporting Countries (Opec), despite its pledge to hold back production between January this year and March 2018 to prop up prices.
"Against expectations, OECD total oil inventories are still above 3 billion barrels and the recovery in Libyan and Nigerian supplies, coupled with a fast return of US shale, should prevent steep stock draws ahead," Bank of America Merrill Lynch (BAML) said, adding that output was set to rise further.
BAML said it was cutting its WTI forecasts to an average US$47 per barrel this year and US$50 in 2018, down from US$52 and US$53 previously.
The bank cut its average Brent forecasts to US$50 this year and US$52 per barrel in 2018, down from US$54 and US$56 before.
Opec exported 25.92 million barrels per day (bpd) in June, 450,000 bpd above May and 1.9 million bpd more than a year earlier, according to Thomson Reuters Oil Research.
Bernstein Research reduced its average Brent crude price forecasts for 2017 and 2018 to US$50 per barrel each, down from US$60 and US$70 previously.
Bernstein said that the reduction was a result of an expected increase in US shale oil output, especially from the Permian field.
Bernstein also said that non-shale supply additions outside Opec would likely exceed or match production declines of mature fields.
Denmark's Saxo Bank said that oil prices could rise towards US$55 per barrel in the coming months, but said it expected lower prices towards the end of the year and into 2018, especially if Opec and Russia fail to extend the production cut deal beyond the first quarter of 2018.