By Keith Wallis and Henning Gloystein
SINGAPORE (Reuters) - Brent crude oil prices reversed most of their early gains to steady below $54 per barrel on Tuesday as high ongoing oversupply dragged on the market.
Prices on the other side of the Atlantic fell for a sixth session to just above a six-year low, keeping their discount to Brent at near $10, a trend that analysts say could deepen.
"The oil market is currently oversupplied, driven in part by the success of North American shale," Morgan Stanley said.
While the U.S. rig count has dropped from 1,809 rigs a year ago to 1,125 last week, past cycles have shown that there is "often a lag between when drilling stops and when oil supply stops growing", the bank said in a note.
Brent, which rose to a session high of $54.38, was trading at $53.99 by 0430 GMT. The April contract that expired in the previous session closed down $1.23 after hitting $52.50 earlier in the day, its lowest since Feb. 2.
U.S. crude, or West Texas Intermediate (WTI), was at $43.69 a barrel, down 19 cents and slightly above 6-year lows of $42.85 hit on Monday.
"We expect WTI to remain under pressure as inventories swell further as the seasonal maintenance period begins. We expect this to remain the case in the short term," ANZ bank said.
"There is a lot of trade on it. Traders would be quite happy to see the spread go out to $15-20," said Jonathan Barratt, chief investment officer at Sydney's Ayers Alliance.
"We have reached a real bifocal point for the market. We either enter a more bearish mood with a new low or it turns around and becomes a bit bullish," he said.
Traders are now waiting for data on U.S. crude inventories for price direction. A Reuters poll showed a likely build in stocks for a tenth week to a new record high.
The poll was released ahead of weekly reports from industry group the American Petroleum Institute (API) and from the U.S. Department of Energy's Energy Information Administration.
The potential of a nuclear deal that could end sanctions against Iran, allowing Tehran to send more of its oil into the market, also dragged on oil markets.
The United States and Iran inched toward a landmark nuclear agreement that would result in the removal of sanctions against Tehran, although differences remained.
Iran has said it will boost oil exports once the sanctions are lifted.
(Editing by Himani Sarkar)
