Oil fell towards $US61 a barrel on Friday amid lingering scepticism on the pace of a global economic recovery, but prices are on track to snap four straight weeks of decline to post a weekly gain.
Helped by a rally in the equities markets and some positive economic data, oil is on course to rise about 2.7 per cent this week, partially reversing last week's 10.3 per cent drop, which was the highest weekly decline since early February.
US crude oil for September delivery fell 50 cents to $US61.52 a barrel, reversing the previous sion's gains of 48 cents that saw the contract settle at $US62.02.
London Brent crude fell 50 cents to $US63.25 a barrel.
"Sentiments on oil are split between those who believe a recovery is on its way and therefore prices should climb higher, and those who are looking at the supply-demand fundamentals and believe that the market is still very weak," said Victor Shum, a Singapore-based analyst at Purvin & Gertz.
Oil's gains on Thursday were helped by a rise on Wall Street following more upbeat corporate earnings and a report that showed strong economic growth in China, the world's second biggest consumer of energy.
"Generally, I think the market still needs more positive economic indicators to be convinced of a sustainable recovery," Shum said.
The number of Americans filing for jobless benefits fell to the lowest level since January last week, a decline linked to upheaval in the auto industry, while a key regional manufacturing index slipped more than expected in July, reports showed on Thursday.
Oil prices remain down nearly $US10 since early July - partially reversing last quarter's 40 per cent surge - amid lingering concerns about global energy demand, which has been contracting for the first time in a quarter century under the weight of the economic recession.
US government data this week showing a swelling in gasoline stockpiles in the week of July 10 despite the July 4 Independence Day holiday when the summer driving season typically peaks, remains a stark reminder for investors that demand in the world's top energy consumer is still tepid at best.
Nouriel Roubini, one of the few economists who accurately predicted the magnitude of the financial crisis, said on Thursday the worst of the turmoil had passed, but emphasised the US would still need a second fiscal stimulus, possibly by the end of this year, as the unemployment rate quickly approaches 10 per cent.
Separately, OPEC seaborne oil exports, excluding Angola and Ecuador, will fall 190,000 barrels per day in the four weeks to August 1, an analyst who tracks future shipments said on Thursday.
In Nigeria, France's Total has declared force majeure on cargoes of Nigerian Amenam crude oil loading from the middle of July due to technical problems.
Economic data due out later on Friday include the US housing building permits for June and the US ECRI weekly index, which will be keenly watched by investors to gauge how the economy was faring.