Languishing oil prices and a difficult outlook could hamper any recovery in Singapore's oil and gas sector.

Oil hit a seven-month low on Thursday and while there was a slight recovery yesterday, forecasts of more production have prompted analysts to project a grim outlook for the rest of the year.

Brent crude futures were up 43 US cents at US$47.35 per barrel yesterday evening, while West Texas Intermediate crude futures were at US$44.71 per barrel, up 25 US cents.

Increased production has been the main culprit, although the Organisation of Petroleum Exporting Countries (Opec) pledged last month to extend cuts in production by 1.8 million barrels per day (bpd) for an extra nine months until the end of the first quarter next year.

However, the impact of this has been undermined by increased production in the United States. The US Energy Department noted that oil production, which averaged 8.9 million barrels a day last year, will rise to 9.3 million barrels a day this year.

"Simply put, the combined global production is more than what the world needs per day. This is further complicated by the ascent of non-conventional US shale production, which has made a huge comeback against all the odds, driven by technological and cost improvements," said Mr Jeffrey Halley, a Singapore-based senior market analyst at futures brokerage Oanda.

Recovering production from Libya and Nigeria, both of which were exempt from the Opec cuts, and high exports and production from Russia were "swamping" the cuts made by the Opec, he said, adding that the "outlook of oil looks grim, unless the production cuts are increased, which is unlikely".

There were expectations earlier this year that the oil glut would be balanced this year, leading analysts to forecast prices recovering to above US$50 a barrel.

An OCBC report noted yesterday that in December last year, Opec expected US oil production to decline by 150,000 bpd but it now expects it to increase by 800,000 bpd.

The twist in expectations follows Opec's failed attempt to drive its US competitors out of business.

In 2014, cartel leader Saudi Arabia unexpectedly raised production even as prices fell. The goal was a price slump which it hoped would force American producers out, but instead, US shale producers reduced costs through new technologies.

The oversupply looks likely to continue next year. On Wednesday, the International Energy Agency wrote in its monthly report that oil output will continue to outstrip demand, primarily because of US production.

"Our first look at 2018 suggests that US crude production will grow year on year... such is the dynamism of this extraordinary, very diverse industry it is possible that growth will be fasted," said the report.

CIMB economist Song Seng Wun expects oil prices to hold at about US$50 a barrel for another six months or so, until the next Opec meeting in Vienna in November.

"Although there are signs of improved global growth, the underlying demand is still less than supply," he said.

"It's not going to be fun for the oil and gas sector here. It may have bottomed out, but the upturn is some way away if oil prices continue to stay low," he added.

He noted that the volatile oil prices would continue the "slow and uneven recovery" of the Singapore economy.

"While the oil and gas sector continues to languish, the bright spot for Singapore are the tech and electronics sectors, which are doing much better," he added.