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Global benchmark Brent crude was trading up 49 cents at $42.63 a
barrel at 1031 GMT (0631 EDT). U.S. West Texas Intermediate (WTI)
crude was up 38 cents at $40.44 a barrel, after briefly dipping
below $40.
"There is much talk about the product glut replacing the oil
glut, and this is a worrisome indicator for crude demand," said
Frank Klumpp, oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg.
Global fuel inventories are brimming as refineries have churned
out huge volumes of diesel, gasoline and jet fuel but the supply
glut has diminished profit margins and demand has been unable to
keep up with supply.
Analysts said high crude and product production levels would
continue to weigh on markets and that as a result, refiners were
likely to reduce orders for new crude feedstocks, affecting
demand for oil.
"Weaker crude throughput at refineries will lower crude demand,"
BMI Research said.
Financial oil traders have taken note of the glut, with
speculators taking on large volumes of bets that would profit
from lower prices, known as shorts.
"I see a strong build in shorts. They are starting to reach
excessive levels," said Hans van Cleef, ABN AMRO senior energy
economist.
U.S. commercial crude inventories are expected to show a weekly
fall after last week's unexpected rise in stocks broke a
nine-week drawdown, according to a Reuters poll. [EIA/S]
Gasoline and distillate inventories are also expected to have
fallen, the poll indicated.
(Additional reporting by Henning Gloystein in Singapore; Editing
by Dale Hudson)
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