Crude oil edged up on Tuesday, lifting further away from over two-months lows seen last week, as traders price in a risk premium following the Paris attacks and the resulting French airstrikes in Syria.
Despite the lift, analysts said that prices would likely remain at low levels as oil markets stay oversupplied, with most estimates for 2015 ranging from production outpacing demand by 0.7-2.5 million barrels per day, and many speculators positioning themselves for further price falls.
Front-month U.S. crude futures were trading at $41.86 a barrel at 0207 GMT, up 12 cents from their last close and over a dollar above last week's more than two-month low.
Internationally traded Brent crude futures were up 16 cents at $44.72 a barrel.
"Oil prices are likely to remain volatile amid rising geopolitical tension post the Paris attack," ANZ bank said on Tuesday. "(But) the upside in prices is limited as Syria's oil output is less than 25,000 barrels a day, and the market is heavily oversupplied."
BMI Research said that "the well supplied crude market, record high inventories in OECD and lack of a material threat to the oil facilities in the Middle East from the military escalation against IS in Syria are going to prevent geopolitical premiums building in oil prices in the aftermath of the Paris terrorist attacks."
Lower for longer
Money managers cut their net long U.S. crude futures and options positions to the lowest in three months during the week to Nov. 10, the U.S. Commodity Futures Trading Commission (CFTC) said on Monday.
The speculator group cut its combined futures and options position in New York and London by 27,456 contracts to 127,351 during the period.
The cut in bets on higher prices has come in parallel to soaring amounts of contracts actively betting on a further fall in oil.
U.S. crude oil prices have now been lower than $50 per barrel for longer than they were during the height of the global credit crunch in late 2008/early 2009, when they were under that level for 74 straight days and another 14 intermittent days before and after.
This year, U.S. crude has been below $50 a barrel for 84 days since July as well as another 44 days earlier in the year.