Oil prices fell close to three-month lows on July 27 after U.S. industry data showed weekly oil stocks declined by less than expected, feeding into concerns over persistent oversupply dragging down prices.

Global benchmark Brent crude was on track for the first monthly loss since January and the largest of 2016. Futures traded 51 cents down at $44.36 a barrel (bbl) by 5:45 a.m. CT (10:45 GMT).

U.S. West Texas Intermediate (WTI) crude was trading down 22 cents at $42.70/bbl, close to a three-month low of $42.36 reached on July 26.

"Today's weakness is just part of the general belief that the market is oversupplied," said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.

Weekly industry data from the American Petroleum Institute late on July 26 showed that U.S. crude stocks fell by 827,000 bbl in the week to July 22, well short of the 2.3 MMbbl draw that had been expected.

Closely watched U.S. government oil stocks data will be published at 9:30 a.m. CT (14:30 GMT) on July 27.

"Falling gasoline stocks and a renewed decline in U.S. oil production would contribute to stabilizing oil prices," said Carsten Fritsch, commodities analyst at Commerzbank.

A firmer dollar has also weighed on oil prices over recent weeks. A stronger U.S. currency makes dollar-denominated commodities such as oil more expensive to buy.

Other analysts said they expect prices to fall further in the short term as oversupply persists while demand growth stutters.

"My view is that oil prices will find a low between $39/bbl and $42/bbl over the coming weeks," said Ric Spooner, chief market analyst at CMC Markets.

"After that, however, we are coming closer to seeing a balanced market again," he added, saying that $50/bbl to $60/bbl would represent such supply and demand balance.

Eldar Saetre, CEO of Norwegian state oil producer Statoil ASA (NYSE: STO), said he expects the market to fall into balance over the course of this year.

"We see clear signs that we are on our way to a balanced oil market," he said.