Brent crude oil futures edged higher on Friday but were still trading near three-month lows as the pressure of a persistent supply glut weighed on prices.
The overhang that has cut prices by more than 10 per cent since the start of November kept a lid on prices, and US benchmark West Texas Intermediate (WTI) was on track for a weekly loss.
The front-month Brent crude contract was 25 cents higher at $44.43 a barrel at 10am. The contract finished just four cents higher on Thursday at $44.18.
US WTI crude was trading flat at $40.54 a barrel. It ended down 21 cents on Thursday, after dipping to $39.89 during the previous session, its lowest since August 27th.
Analysts said that while the supply demand balance remained shaky, traders were taking a step back from bearish indications.
"The market is fatigued from having looked at the production statistics and the ever increasing supply glut," said Sucden analyst Kash Kamal.
“Fundamentals are taking a back seat for now.”
Kamal also said fluctuations in the US dollar, which traded near a seven-month high this week, could impact crude prices. A strong dollar makes oil and other commodities more expensive for holders of other currencies.
Crude futures are already down around 60 per cent since mid-2014 as supply has exceeded demand by 0.7 million to 2.5 million barrels per day, creating a glut that analysts say will last well into 2016.
The glut has seen Iraqi crude grades selling as low as $30 a barrel, while official selling prices from Nigeria have fallen to their lowest in more than a decade.
US crude futures have been particularly battered, with data from the country's Energy Information Administration showing an eighth straight week of stock builds.
A growing discount between the front month and forward contracts, which was trading near a record wide $8 a barrel, has sparked talk of traders storing more crude in the hope of delivering later at higher prices.
Market data suggests oil traders are preparing for another downturn in prices by March 2016, as forecasts for an unusually warm winter dent demand and Iran prepares for post-sanctions crude oil exports.
