LONDON (Dow Jones)--Crude oil futures traded higher Monday, after stronger European equities helped oil prices pare losses incurred earlier in the session and during Asian trade. Despite the small gains, however, market participants remained cautious about the prospects of sustained oil price rises with little sign emerging of improving supply and demand fundamentals. "A light rally on the stock market seems to have given the [oil] market some support, however one would expect the medium-term [weak] fundamentals to put a bit of downward pressure on the oil market," said a crude oil broker based in London. Trade activity is expected to be light Monday with a public holiday in the U.S. sidelining many participants. At 1237 GMT, the front-month March Brent contract on London's ICE futures exchange was 33 cents higher at $77.44 a barrel. The front-month February contract on the New York Mercantile Exchange was trading 49 cents higher at $78.49 a barrel. The ICE's gasoil contract for February delivery was $3.25 lower at $626.75 a metric ton, while Nymex gasoline for February delivery was 116 points higher at 205.70 cents a gallon. Oil prices garnered some support from European equity markets, which gained after rising gold and other metals prices supported basic resource stocks. However, many participants were unconvinced that the crude oil market can break its recent bearish trend, which has seen prices retreat by almost $5 a barrel since Jan. 6. Adding further doubt to bullish hopes is the growth in net long positions by speculative traders, who are expected to liquidate their positions and exit the markets if crude oil prices continue their weakening trend. "Speculative traders have been increasing their net long positions by over 80,000 contracts, a 15% rise in the past month, and this could put on selling pressure should the oil price continue to drop below $74 a barrel," said Mark Pervan, head of commodity research at ANZ in Melbourne. Separately, the prospects of increased production by the Organization of Petroleum Exporting Countries is also damping sentiment with onshore and offshore inventories flush with supplies despite a prolonged cold snap in the northern hemisphere. The International Energy Agency last week estimated OPEC compliance to have fallen to 58% in December from 60% the previous month, indicating a further loosening of compliance by the oil-producer group to their previously agreed 4.2 million barrel-a-day cut in supply. "We have always reiterated that excessive output is worrying, given overhang stocks and the fact that OPEC remains the key swing producer with significant spare capacity at the moment," said Andrey Kryuchenkov, an analyst at VTB Capital. "The most important issue for the price outlook is for OPEC not to overproduce this year as swollen stockpiles do not need extra supplies at the moment." The pricing dispute between Russia and Belarus over export duties continues to put oil flows to Europe at risk, with the latest reports suggesting Russia has diverted an oil shipment earmarked for Belarus to the Polish oil terminal of Gdansk. The Polish port will load a 100,000-metric-ton tanker with Russian oil at the end of January, a shipment that hadn't been earlier expected, Naftoport chief executive Dariusz Kobierecki told Dow Jones Newswires.

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