LONDON: Oil prices fell on Thursday as a build in U.S. crude inventories and record Saudi Arabian production reinforced fears of a large global supply overhang.
But markets found some support from forecasts of a tighter market later this year as the International Energy Agency (IEA) predicted a gradual draw in stocks through the third quarter.
U.S. light crude traded around $41.15 a barrel by 0830 GMT, down 56 cents. North Sea Brent crude was down 50 cents at $43.55.
"The market is clearly concerned about oversupply," said Tamas Varga, analyst at London brokerage PVM Oil Associates. "That's driving prices lower."
Oil prices fell sharply on Wednesday after data from the U.S. Energy Information Administration showed crude inventories rose 1.1 million barrels in the week ended Aug. 5. Analysts polled by Reuters had expected a 1.0 million barrel crude draw.
World oil output has been well above consumption over the last two years, pushing up stocks across the globe at a time when sluggish economic growth has kept a lid on fuel demand.
Production by the Organization of the Petroleum Exporting Countries (OPEC), of which Saudi Arabia is the de-facto leader, has been boosted by producers such as Iraq and Iran.
OPEC expects demand for its crude in 2017 to average 33.01 million bpd, suggesting a supply surplus of 100,000 bpd if OPEC keeps output steady.
But rising demand should help curb stocks later this year, the IEA said on Thursday.
"Oil's drop...has put the 'glut' back into the headlines even though our balances show essentially no oversupply during the second half of the year," the Paris-based IEA said in its monthly report.
Many analysts say they see oil prices trading within a range for the next few weeks.
Matt Stanley, a fuel broker at Freight Investor Services in Dubai, said he expected crude prices to "be stuck in a range between $40 and $45 (per barrel) for a while".
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