Asia Crude Oil Prices Drop 1% in Session

U.S. West Texas Intermediate (WTI) crude futures were down 55 cents, or 1.13 percent, at $47.97 per barrel.

International benchmark Brent crude oil futures were trading at $50.13 per barrel, down 75 cents, or 1.47 percent.

Analysts cast doubt on a recent oil price rally, saying that much of it was a result of short-covering and anticipation of upcoming oil producer talks in September to discuss means to curb ballooning oversupply.

With no fundamental tightening of the market in sight, they said that prices would likely come under downward pressure again soon.

“Our view that the latest oil bounce is more technical than fundamental. In fact, new buyers have been mostly absent the past few months,” U.S. bank Morgan Stanley said.

Regarding the upcoming producer talks, the bank said that it viewed a meaningful "agreement as highly unlikely" and that there were "too many headwinds and logistical challenges to a meaningful deal".

Members of the Organization of the Petroleum Exporting Countries (OPEC) and other oil producers like Russia are set to meet in September to discuss a freeze in output levels or even a cutback in order to rein in on oversupply, but analysts said animosity between OPEC Arab members Saudi Arabia and Iran made a deal unlikely.

“Though Iran now sits roughly 200,000 barrels per day away from its monthly pre-sanctions peak in May 2011, we do not see it accepting restraints on its output, and without Iran's inclusion, Saudi Arabia will not take part,” Barclays bank said.

Because of the ongoing production and storage overhang in crude and refined products markets, Barclays said that the 20-percent price rally since early August was unwarranted, and that oil prices of $50 or higher were currently "unsustainable".

“Oil prices will likely experience another short-term dip in the coming weeks, in our view, before more sustainably moving to average $50 in Q4,” it added.

Vibiz Research Center Analyst predicts crude oil prices in the next trade could potentially weaken with the potential of a stronger US dollar and doubts of a production freeze. Prices are expected to break in the Support range of $47.50 – $47.00, and if prices rise, it will enter the Resistance range of $48.50 – $49.00.