UPDATE 2-Oil prices driven up by futures bets, but market remains bloated

* Financial traders pour new cash into crude long positions

* But physical oil markets remain bloated

* U.S. drilling for new oil rises for record 21 weeks (Adds comment, updates prices)

SINGAPORE, June 12 (Reuters) - Oil prices rose on Monday as futures traders bet the market may have bottomed after recent falls, even as physical markets remain bloated, especially from a relentless rise in U.S. drilling.

Brent crude futures were at $48.29 per barrel at 0651 GMT, up 14 cents, or 0.3 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $45.95 per barrel, up 12 cents, or 0.3 percent.

Traders said that the price rises came on the back of speculative traders upping their investment into crude futures, by taking on large volumes of long positions.

The rise in long positions comes after Brent and WTI crude fell by around 10 percent below their openings of May 25, when an OPEC-led policy to cut output was extended to cover the first quarter of 2018.

"Oil bulls have reset for a technical bounce," said Stephen Schork, author of the Schork Report.

While financial traders have confidence in rising prices, the physical market remains bloated, especially due to a rise in U.S. drilling for new oil production.

U.S. drillers added eight oil rigs in the week to June 9 <RIG-OL-USA-BHI>, bringing the total count up to 741, the most since April 2015, energy services firm Baker Hughes Inc said on Friday.

This drive to find new oil has pushed up U.S. output by over 10 percent since mid-2016, to 9.3 million bpd, a figure the U.S. Energy Information Administration says will likely rise above 10 million bpd by next year, challenging top exporter Saudi Arabia.

Soaring U.S. output undermines an effort led by the Organization of the Petroleum Exporting Countries (OPEC) to cut almost 1.8 million bpd of production until the first quarter of 2018 in order to prop up prices.

Despite this, Russian Energy Minister Alexander Novak said on Sunday there was no need to review the agreement on reducing oil output as it was too early to make any decisions.

Russia, not a member of OPEC, is the world's biggest oil producer but it is participating in the production cuts.

Saudi energy minister Khalid Al-Falih made similar statements over the weekend.

On the demand side, Morgan Stanley said on Monday that consumption by U.S. oil refineries was strong, but that there was a risk they were overproducing.

"Refinery utilization (at 94.1 percent)... remains seasonally high and above the historical range... (but) we see risk of an oversupplied domestic product market with worries that domestic demand... won't be able to absorb it," the bank said. (Reporting by Henning Gloystein; Editing by Joseph Radford and Biju Dwarakanath)