Oil prices extend gains in Asia

Oil edged higher in Asia Tuesday, extending gains from the previous day after US firms cut drilling activity, but analysts doubt the rebound will be sustained as supplies still far outweigh demand.

US benchmark West Texas Intermediate (WTI) for March delivery rose 37 cents to $49.94 while Brent crude for March gained 22 cents to $54.97 in late morning trade.

On Monday, WTI punched through the psychological mark of $50 a barrel before closing at $49.57 while Brent tested $55 mark before ending at $54.75.

"With the phenomenon of month-end rollover action taking place these two days, such wide moves are to be expected," said Nicholas Teo, market analyst with CMC Markets in Singapore.

"However, the increasingly wide oversupply and weak demand imbalance for this resource won't allow a sustained recovery for oil in the near term," he said in a market commentary.

Oil has lost more than 50 percent of its value since June last year when the commodity was sitting at more than $100 a barrel, largely due to a surge in global reserves boosted by robust US shale production.

However, some analysts say the collapse in prices will force US companies to slash output.

The weekly Baker Hughes rig count, a barometer of drilling activity in the United States, showed a record drop of 94 oil rigs to 1,223 for the week ending January 30.

The cuts in drilling rigs came on the heels of announcements by Chevron, ConocoPhillips and other major producers that they will slash capital budgets in 2015.