LONDON: Oil rose on Monday to break a two-day losing streak, after futures traders increased their bets on a renewed price upswing even though rising US drilling helped keep physical markets bloated.
Brent crude futures were up by 63 cents at $48.78 a barrel by 1405 GMT, having hit a session high of $49.15. US West Texas Intermediate (WTI) crude futures rose 61 cents to $46.44, having peaked at $46.69.
Traders and analysts said the bounce looked technical in nature, after WTI rallied and encouraged a similar move in the Brent market. But they said the move might prove fleeting.
"When you start to approach $45 a barrel in WTI, you're in an area where you do find some price support and I think there has been some evidence last week of investment flows coming back into crude oil," Petromatrix strategist Olivier Jakob said.
"You have to be careful not to be too optimistic for now," he said. "Physical differentials are still under pressure and the time structure is still under pressure in Brent. It's a bit premature to call for much higher oil prices."
Traders said the price rises came as data showed speculative traders had increased their investment in crude futures by taking on large volumes of long positions.
"Oil bulls have reset for a technical bounce," said Stephen Schork, author of the Schork Report.
While financial traders have confidence in rising prices, the physical market remains under pressure, especially due to a rise in US drilling.
US drillers added eight oil rigs in the week to June 9, bringing the total count to 741, the most since April 2015, energy services firm Baker Hughes Inc said on Friday.
US output has risen by more than 10 percent since mid-2016, undermining OPEC-led pledges to cut almost 1.8 million bpd of production until the first quarter of 2018.
The oil price slid to one-month lows last week as evidence of rising output in Libya and Nigeria, two OPEC members excluded from the cuts, added to investor concerns about excess supply.
"With the typically tighter second half of the year fast approaching, rumours of oil prices having found their bottom are doing the rounds," PVM Oil Associates analyst Stephen Brennock said in a note.
"Yet such claims are premature as lingering doubts that prolonged OPEC curbs will drain the oil glut along with the simultaneous uptick in US, Libyan and Nigerian output make for a bearish cocktail," he wrote.
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