International Brent crude oil futures were trading at $42.33 per barrel, up 19 cents from their last close.
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Oil edged higher on light short-covering on Wednesday after plumbing April lows the previous day, with investors warily eyeing a market believed to be oversupplied despite expectations of a drop in USA crude stockpiles.
On Thursday, Oil prices inched lower in European trade, after increasing over 3 percent overnight after a larger than expected gasoline draw reduce worries about global oversupply.
US gasoline futures, however, ended up only 1.3 percent higher on Thursday, with the gasoline crack 1RBc1-CLc1 , an indicator of refining profits, falling for the first time in six sessions.
Futures gained 0.8 per cent after dropping below US$40 on Monday for the first time since April.
Delivery of Crude oil for September on the NYMEX plunged 7 cents or 0.14 percent, to trade at $40.78 a barrel by 07:52GMT, or 3:52AM ET.
Analysts polled by Reuters expect the U.S. government to report on Wednesday that crude stockpiles fell 1.4 million barrels last week after a surprise build the previous week that broke a nine-week drawdown.
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.
“We’re now back looking at a situation in which supply could pick up considerably again and prices as a result head south”.
“Speculators increased their shorts by the biggest volume on record… for WTI crude…, dragging the net long position in WTI to its lowest since February”, said Matt Smith of US-based ClipperData.
That collapse was triggered by a glut that was worsened by rising unconventional oil production, mainly from booming U.S. shale crude, alongside the OPEC cartel’s reluctance to cut output. However the country’s crude supply managed to increase 1.4 million barrels last week, as compared to the markets’ expected drop of 1.4 million barrels.
“Supply and demand balances have disappointed the oil bulls, but we think that should in no way be taken as a sign that material rebalancing is not under-way”, they said.
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Prices were little changed after oil-field services company Baker Hughes Inc. said the number of rigs drilling for oil in the USA rose by seven to 381.
