Oil prices seesaw as market torn between the bulls and bears

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Oil markets have seesawed since the beginning of the week, torn between data that points towards a bottoming out of prices following an over 50 percent fall over the last year and bearish analysts who see more price falls as oversupply lingers on.

Crude oil prices fell on Tuesday as traders took profit following a 4 percent bounce in the previous session as conflicting market signals tore at prices.

Traders also focused on the soon-to-expire front-month contract in the West Texas Intermediate (WTI), which serves as the U.S. benchmark. WTI's October contract will go off the NYMEX board after Tuesday's settlement, and November will move up as the front-month.

U.S. West Texas Intermediate (WTI) crude futures were trading at $46.20 per barrel at 0200 GMT, down 48 cents, or one percent, from their last settlement. Globally traded Brent futures were at $48.47 per barrel, down 45 cents.

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The dip in prices came after oil rallied on Monday, with U.S crude surging more than 4 percent on signs of declining stockpiles and a fall in drilling activity, which implies lower future oil production.

A Reuters poll on Monday forecast that U.S. crude inventories as a whole fell by 2.1 million barrels last week.

Technical market indicators pointed towards further price increases, with Reuters analyst Wang Tao seeing Brent rise to $49.70 per barrel based on Fibonacci retracement indicators while WTI could edge up to $47.78 a barrel.

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In another indicator that prices may have bottomed out, hedge funds continued to pare short positions in U.S. crude oil last week in a sign that they are no longer believe in big further price falls.

Yet many analysts stay oil prices still have space to fall, with several banks including Goldman Sachs and ANZ revising their price forecasts downward this month, arguing that it will take until at least 2016 or 2017 to remove a huge overhang that has been built up over the last years by soaring production just as demand slows.

"We think that WTI will trade down to below US$40/bbl over the next six months, before supply-side constraints start to be felt," ANZ bank said in its latest forecast revision published this week.