By Ayenat Mersie
NEW YORK (Reuters) - Oil prices rebounded from earlier losses after Brent hit a two-month low, as investors attempted to capitalise on recent declines in benchmark contracts that came from renewed worries about oversupply.
The market earlier dropped after the Paris-based International Energy Agency said global oil supply would outstrip demand this year, prompting fears that efforts to reduce inventories would fall short of expectations.
Brent crude futures were down two cents to $62.57 a barrel by 12:25 p.m. EST (1725 GMT), while U.S. West Texas Intermediate crude futures dropped 15 cents to $59.14 a barrel.
Oil prices fell for six straight sessions last week, wiping away the year's gains amid a volatile stock market.
"I think there are a lot of people who are praying that last week's collapse in crude...was some anomaly, and that as soon as the stock market recovered, the crude market would recover with it," said Walter Zimmerman, chief technical analyst at United-ICAP.
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"So far its looking a little ominous but WTI has not broken down," Zimmerman said, adding the contract would have to decline more to enter a bear market.
The IEA revised its global demand forecast upward by 7.7 percent, but rising production, particularly from the United States - which overtook Saudi Arabia last week to become the second-largest global producer - may outweigh demand gains.
"U.S. producers are enjoying a second wave of growth so extraordinary that in 2018 their increase in liquids production could equal global demand growth," the IEA said.
U.S. oil production is expected to surpass 11 million barrels per day in late 2018, a year earlier than projected last month, the U.S. Energy Information Administration said last week. [EIA/M]
The Organization of the Petroleum Exporting Countries said on Monday it expected world oil demand to climb by 1.59 million bpd this year, an increase of 60,000 bpd from the previous forecast, to 98.6 million bpd.
OPEC and other producers including Russia have been reducing supplies since 2017. The cuts are scheduled to last through 2018.
Seasonality may also be affecting prices, analysts said.
"A driving force behind the next few weeks of pricing vulnerability stems from the current peak in U.S. refinery maintenance season," Michael Tran, commodity strategist at RBC Capital Markets, wrote in a research note.
The private American Petroleum Institute is due to publish crude inventory estimates on Tuesday, while the U.S. government's Energy Information Administration releases weekly inventory data on Wednesday.
(Additional reporting by Amanda Cooper in London and Henning Gloystein in Singapore; Editing by Marguerita Choy and Jane Merriman)