Oil prices edged away from three-month lows on Tuesday, supported by a weaker dollar, but concerns of ongoing oversupply weighed on markets and many traders are raising their bets on further price falls.
International Brent crude oil futures were trading at $44.80 per barrel at 0134 GMT, up 8 cents from their last close. U.S. West Texas Intermediate (WTI) crude were at $43.16, up just 3 cents per barrel.
Brent hit its lowest level since May the previous day, while WTI hit its lowest level since April.
Traders said the higher prices were partly a correction after the previous day's sharp falls, and also reflected a dip in the dollar against other leading currencies away from March highs.
As oil is traded in dollars, a cheaper greenback makes fuel imports cheaper for countries using other currencies, potentially spurring demand.
Despite the slightly higher oil prices, analysts said the overall mood in oil markets had turned bearish.
"Ongoing fears of oversupply are encouraging hedge funds to liquidate their recent record bullish position; at the same time, we are also seeing a corresponding increase in speculative short positions," said Matt Smith of U.S.-based ClipperData in a note.
Hedge funds have been liquidating bullish positions in crude futures and options, putting downward pressure on oil prices in recent weeks.
Now the liquidation of old long positions, which profit from rising prices, is being replaced by the establishment of short positions, which make money out of lower prices, as fund managers try to capitalise on the downward cycle in prices.
Hedge funds and other money managers cut their net long position in Brent and WTI futures and options by 31 million barrels to 453 million in the week ending on July 19.
