Brent crude extended its rally on Tuesday, moving further away from six-year lows hit in January.
But some analysts warn that prices have risen too far and could face a downward correction.
Benchmark Brent crude futures were trading up 50 cents at US$61.90 a barrel by midday (Hong Kong time), while US WTI crude had risen 26 cents to US$53.04 a barrel, Reuters reported.
“The recent bullishness is not heavily backed by technical and fundamental analysis, and so should not last,” said Daniel Ang of Singapore-based Phillip Futures.
“The market is getting increasingly dubious as to this rally, with the CFTC showing that non-commercial net long positions are starting to fall,” ANZ bank said in note.
Analysts also said downward pressure may come from the refined products market in the next quarter.
“Consensus expects large inventory builds and pricing pressure for oil markets in 2015,” Morgan Stanley said.
Demand for refined oil products has been strong in Asia, which is structurally short, and producers have been taking advantage of low crude prices to cover themselves with fuel and build up product inventories.
With Brent prices outperforming US contracts, the spread between the two benchmarks has risen to almost US$9 a barrel, the highest level since August last year, and the trend will continue, analysts said.
“Considerable pressure is likely to build on WTI as inventories approach the EIA’s 71 million barrel working storage capacity figure and we would therefore expect a wider WTI/Brent spread (low double-digit territory),” said JBC Energy.
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