SINGAPORE - Oil prices fell in Asia Wednesday, giving up meagre gains in the previous session as investors await a US inventory report to gauge demand in the world's top economy.
US benchmark West Texas Intermediate for September delivery fell 17 cents to $42.45 a barrel and Brent crude for October dipped 23 cents to $48.58 a barrel in late-morning Asian trade.
Both contracts eked out modest rebounds in closing deals in New York on Tuesday.
But analysts said prices were unlikely to stage a sustained rally because the market remains awash with supplies from the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia.
Oil traders are also watching a report on US crude inventories in the week ending August 14 due later Wednesday to measure demand in the world's biggest economy and large producer of shale oil.
Analysts expect inventories to decline, but also said stockpile levels remain high after a weaker-than-hoped rise in demand during the summer driving season.
"Output in the US has turned out to be more robust than many had previously assumed, as shale firms have dramatically slashed costs and increased their efficiency rather than cutting production," said Thomas Pugh, commodities economist at research firm Capital Economics.
Demand growth is not keeping pace with supply, especially with the slowdown in China, the world's top energy consuming nation and its second-biggest economy.
Iran last month also reached an agreement with major world powers to rein in its nuclear ambitions in exchange for the lifting of crippling Western economic sanctions which have restricted its oil exports.
"This renewed decline in oil prices has largely been driven by a combination of concerns about demand, notably from China, and continued strong growth in supply," said Pugh.
"OPEC has increased its output by almost 1.4 million barrels per day since January and the potential return of exports from Iran early next year could exacerbate the supply glut," he said.