LONDON: Brent crude oil prices pared losses in choppy trading on Tuesday, but remained at the lowest levels since early February as traders refocused attention on the mounting supply glut.
Rising U.S. crude oil stocks, an increase in Libyan oil production and the chance of an agreement between Iran and the West that could ease sanctions on the oil producer and boost its exports all pulled prices lower.
"OPEC members are still staunchly producing...and demand from Europe and China are really struggling to pick up," said Kash Kamal, senior research analyst with Sucden Financial. "The overall tone is quite bearish."
Brent, which fell as low as $52.57, was trading at $52.99, down 45 cents, by 1317 GMT. The April contract that expired in the previous session closed down $1.23 after hitting $52.50 earlier on Monday, its lowest since Feb. 2.
U.S. crude, or West Texas Intermediate (WTI), hit a fresh six-year low of $42.63 a barrel before recovering to $43.34, down 54 cents.
Though fighting between rival governments has complicated Libya's oil production, the country is set to export more than 1.2 million barrels of crude oil from the eastern ports of Hariga and Zueitina in the coming days.
Crude oil stocks in the United States are also weighing on prices. Industry monitor Genscape showed builds of roughly 3 million barrels this week, and a Reuters poll showed a likely build in U.S. crude inventories for a tenth week to a new record high.
Further weekly data on U.S. crude inventories is due later on Tuesday from industry group the American Petroleum Institute (API).
"We expect WTI to remain under pressure as inventories swell further as the seasonal maintenance period begins. We expect this to remain the case in the short term," ANZ bank said.
Kamal said any suggestion from the U.S. Federal Reserve, which will begin their two-day meeting later today, that they are moving toward their first interest rate rise in a decade could underpin crude prices, as it would suggest optimism from the Fed on the U.S. economy.
Others also see the possibility for markets to stabilise or even rise, with Vitol Chief Executive Ian Taylor telling a conference on Tuesday that oil markets would "come into balance" by the second half of the year.
However the potential of a nuclear deal that could end sanctions against Iran, allowing Tehran to send more of its oil into the market, also dragged on oil markets.
Commerzbank said that if an agreement is reached, up to 1 million barrels per day of additional oil from Iran could reach the market in the second half of the year.
"When people look at the market now, they are looking at the possibility of an Iran resolution," Bjarne Schieldrop, chief commodities analyst with SEB in Oslo.
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