Until there is a supply-side response, the potential for significantly higher oil prices is low, according to chief strategist from CMC Markets.
Oil prices fell further on Monday on persistent worries over the growth slowdown in China's economy and a supply glut but analysts said ongoing tensions between producer giants Iran and Saudi Arabia could provide some support.
US benchmark West Texas Intermediate (WTI) for February delivery down 68 cents at $32.48 (nearly Rs 2,170.31) by 0230 GMT, while Brent crude was down 69 cents at $32.86 (nearly Rs 2,195.70).
Both contracts slid about 10% last week to 12-year lows as global markets were hammered by concerns about China, the world's biggest energy consumer, which overshadowed a strong US jobs report.
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"Sentiment indicators are all to the extreme sell," Michael McCarthy, a chief strategist at CMC Markets in Sydney, told Bloomberg News. "Until we see a supply-side response, the potential for significantly higher prices is low," McCarthy said.
Sanjeev Gupta, head of the Asia-Pacific Oil and Gas practice at professional services organization EY in Singapore, said, "rising tensions between Saudi Arabia and Iran could support the upswing of oil prices in the short term".
But Gupta added that oil markets will be closely tracking new economic data from Europe and China, and "further signs of a slowdown will put further downward pressure on the price of crude".
On Sunday, top Arab diplomats rallied behind Saudi Arabia in a dispute with Iran that has threatened to derail efforts to resolve Middle East conflicts including the war in Syria. The row between the two major oil producers erupted on January 2 after Saudi Arabia's executed a prominent Shiite cleric along with 46 others on terrorism charges.
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