Updated from 2:51 p.m. EDT

Oil prices dipped in and out of negative territory Friday after bouncing from a three-month low earlier in the session.

June crude closed up 13 cents at $48.67 a barrel in Nymex trading. Gasoline futures fell about 2 cents to $1.41 a gallon.

Crude is still down about 7% since Tuesday's close, beaten down by bearish inventory data and indications of a slowdown in demand.

"From a technical perspective, we saw prices bottom out at the $47.75 support level. They bounced back up exactly when they were supposed to," said Mike Ambruster, energy analyst at Altavest Worldwide Trading.

The Organization of Petroleum Exporting Countries, which is scheduled to meet next month, is expected by many analysts to cut production in order to prevent prices from slipping further. Although several OPEC officials have said $50 a barrel is too high, it remains to be seen whether the cartel will allow prices to slip much below that level.

"I doubt OPEC will cut production since it has been their entire second quarter philosophy to build inventories," said John Kingston, director of Oil at Platts.

Still, the big concern, according to market analysts and investors, is the world's dwindling supply surpluses. Up until the mid-1990s, the world had 6 million to 8 million barrels a day of spare crude oil. Today the surplus dwindled to roughly 1 million to 2 million barrels a day.

Kingston expects a significant draw from inventories in the fourth quarter of this year. "There really won't be much spare capacity left after that," he said.

The International Energy Agency recently said global demand is expected to reach 86.1 million barrels a day by the fourth quarter of this year, which is about 2 million more than what's currently used.

Mixed economic reports on Chinese demand fundamentals have analysts struggling when trying to evaluate its impact on global demand.

Reuters

reported Friday that the country's second-largest importer of crude bought 23% more foreign oil in April than it did a year ago.

In the first quarter, however, Chinese demand grew by only 4.5%, compared with a 19.3% jump in the same period a year ago, the International Energy Agency said in a report Wednesday.

Wenchao Su, an oil analysts at Energy Security Analysis Inc., said that with Chinese gross domestic product growth estimated at about 8.5% for 2005, less than the 9.5% last year, oil demand growth will probably slow to about 8% this year, from 18% in 2004.

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Shares of major oil producers slumped.

Exxon Mobil

(XOM) - Get Report

, which saw its share slide more that 5% in the last three sessions, fell 1.86%;

Chevron

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dropped 1.50%;

ConocoPhillips

(COP) - Get Report

decreased 2.58%;

Royal Dutch/Shell

(RD)

fell 1.47%; and

BP

(BP) - Get Report

declined 1.40%.