Oil prices rebounded today after last week's seven-month lows, but were hemmed in by a relentless rise in US supply and a surge in demand for short sale contracts that signal investors see potential for a price fall.

Brent crude futures were up 25 cent, or 0.6%, at $45.79 a barrel by 5pm Irish time, still set for a near 20% drop in the first half of the year.

US crude futures were up 35 cents, or 0.8%, at $43.36 a barrel.

Investors in US crude futures and options, however, increased their bets against any future further rise in prices, as the number of US oil rigs in operation hit its highest in over three years.

"US production could jump to 10, maybe 10.5m barrels a day by the end of the year, and when you add Libya, Nigeria and North Sea production that will negate the Saudi-led cuts," said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut, referring to US output which has steadily grown to around 9.35m bpd.

The rise in supplies threatens efforts by the Organization of the Petroleum Exporting Countries and its partners to reduce global oil inventories with production cuts.

OPEC states and 11 other exporters agreed in May to extend cuts of 1.8m barrels per day (bpd) until March, in the hope that it would force global supply and demand to align.

However US shale oil output is up around 10% since last year, while Nigeria and Libya, who are exempt from the OPEC cuts, have also hiked output.

Iran, which was given a small increase so it could recover market share lost while under Western sanctions, said its production has surpassed 3.8m bpd and is expected output to reach 4m bpd by March.

US drillers have added rigs for 23 straight weeks, energy service company Baker Hughes said on Friday.

"The perception is that we’re going to have slower exploration activity, but the amount of drilling that we’ve been doing is going to guarantee production growth for at least another four or five months," said James Williams, president of energy consultant WTRG Economics in London, Arkansas, "So you’ve still got the downward pressure there."

Analysts at Bank of America-Merrill Lynch said demand had not grown quickly enough to mop up any excess output.

"Looking into the second half of 2017, we now doubt that demand growth will accelerate sufficiently," they wrote.