There is now the possibility prices will remain below the critical $50 threshold if US oil production continues to increase, and OPEC and Russian Federation fail to extend the production deal into the second half of the year.
Oil prices rose on Monday as Saudi Arabia's energy minister said an OPEC-led production cut scheduled to end in June would likely be extended to cover all of the year, or even into 2018, although another increase in US drilling capped gains.
USA light crude was up 35 cents at $46.57 a barrel, up from an intraday low of $45.83. West Texas Intermediate, the USA benchmark for the price of oil, was down 0.28 percent to $46.30 per barrel.
"I do believe however that the worst is behind us with multiple leading indicators showing that supply-demand balance is clearly in deficit and the market is moving towards rebalancing".
"Given the extent of the over-hang I think they always knew the market was not going to rebalance in six months which is why our base case was always for a deal lasting at least one year, and if not longer", said Virendra Chauhan, an analyst at industry consultant Energy Aspects.
Brent crude, the global oil benchmark, rose 19 cents, or 0.4%, to $49.53 a barrel on London's ICE Futures exchange, having last week hit its lowest level since the Organization of the Petroleum Exporting Countries agreed to cut output for six months on November 30.
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"Come 2018 OPEC members will be hard pressed to choose between maintaining a price floor and protecting market share, unless global demand is surprisingly brisk", he added.
Crude oil will remain under pressure unless OPEC throws a surprise in their next meeting.
Both Russia and Saudi Arabia, the world's biggest oil producers, both signalled today their support for extending the production cut that aims to ease a global supply glut.
Some stock markets across Asia fell in tandem with oil prices yesterday as analysts forecast further weakness amid signs that global US and China demand may not be strong enough to mop up the excess production. Oil has surrendered most of its gains since their deal late past year.
He explained further that recent price falls had been caused by the low demand season and refinery maintenance, as well as by non-OPEC production growth, especially in the United States.
The combined Opec and non-Opec cut of around 1.8m barrels a day, which was agreed in late November, is not at the moment expected to be increased in size.
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