* Disappointing China PMI survey dims oil demand outlook
* U.S. crude in 'bear market' after 20 percent drop in six
weeks
* Oil majors could be forced into further spending cuts
(Updates prices)
By Jacob Gronholt-Pedersen
SINGAPORE, July 24 (Reuters) - Oil prices edged up on Friday
after closing at their lowest in months in the previous session
as oversupply and disappointing Chinese factory activity dragged
on the market.
Oil prices in the United States have slumped more than 20
percent in the past six weeks, a slide considered by many
traders to constitute a bear market.
The oil demand outlook dimmed further on Friday after a
preliminary private survey showed factory activity in China's
struggling economy contracted by the most in 15 months in July.
ID:nL3N1032YR
"Concerns around the demand environment were heightened
further today by the PMI (Purchasing Managers' Index) read out
of China," said Michael McCarthy, chief market strategist at CMC
Markets in Sydney.
"The lack of supply side response means that the downtrend
looks to be firmly entrenched, and there seems to be little
opportunity for a turnaround in the near term," he said.
U.S. crude for September delivery CLc1 traded 25 cents
higher at $48.70 a barrel by 0651 GMT, after closing down 74
cents at $48.45, the lowest settlement since March 31.
McCarthy sees potential for U.S. oil to drop to levels last
seen in March at around $42 a barrel. If it breaks through that
mark, it could fall to the mid-$30s, he said.
Brent September crude LCOc1 was up 7 cents at $55.34 a
barrel. The contract had settled at its lowest since early April
at $55.27, down 86 cents.
Both benchmarks are on track to post double-digit losses
this month, in part pulled lower by expectations of higher
Iranian exports following a deal over its nuclear programme with
world powers. ID:nL5N1034H3
U.S. crude is down some 18 percent so far this month and
Brent is down 13 percent.
Oil prices found some support from a weakening dollar
.DXY , which makes it cheaper for holders of other currencies
to buy dollar-denominated commodities.
Oil prices could find additional support if the world's top
exporter Saudi Arabia cuts production after the summer in
reaction to lower seasonal domestic demand, as stated in a
report by an industry publication on Thursday. ID:nL1N1033TN
With a dim outlook for oil prices, the world's top oil
companies could be forced into more spending cuts, as they are
set to report yet another sharp drop in quarterly profits,
according to analysts. ID:nL5N1023IJ
"Oil companies are hunkering down for a downturn that will
take longer than some initially thought," said Martijn Rats,
head of European oil and gas equity research at Morgan Stanley.