Oil prices slipped on Friday, with US crude on track for its first weekly decline in five weeks, as pressure from a stronger dollar, rising drilling and record stockpiles in the United States faced efforts by major producers to cut enough output to reduce a global glut. US energy companies added oil rigs for a fifth straight week, Baker Hughes said, extending a nine-month recovery as drillers take advantage of crude prices that have held mostly over $50 a barrel since OPEC agreed to cut supplies in late November.
The Organisation of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, agreed to cut output almost 1.8 million barrels per day (bpd) during the first half of 2017. Estimates suggest compliance by OPEC is around 90 percent, and Reuters reported on Thursday that OPEC could extend the pact or even apply deeper cuts from July if global crude inventories fail to drop to a targeted level.
"It's encouraging that it may not be a six-month deal but one of the issues is if you look at OPEC and other members basically reducing their supply and US shale producers profiting from it, that's going to produce some turmoil," said Mark Watkins, regional investment manager at US Bank Private Client Group. "At some point, it's going to be difficult for that agreement to stay in place when member countries can drill more and make more money."
Brent crude fell 12 cents, or 0.2 percent, to $55.53 a barrel by 2:19 p.m. EST (1919 GMT). US West Texas Intermediate (WTI) crude futures was down by 24 cents, or 0.5 percent, at $53.12 a barrel. Book squaring in the WTI contract for March delivery ahead of its expiration on Tuesday also pressured prices, traders said. The US market will be closed on Monday for the Presidents Day holiday.
Both benchmarks were on track for losses on the week - WTI set for a drop of 1.3 percent and Brent for a 2 percent fall. Oil prices, however, were holding within an average of about $1.30 per barrel so far this year, one of the most range-bound periods since the price slump began in mid-2014.
US gasoline futures were leading the losses in the energy complex, slumping nearly 2 percent. The gasoline crack spread, a key indicator of refining margins, fell more than 11 percent early in the session, hitting one-year lows. Rising US output has helped boost crude and gasoline inventories to record highs last week, amid faltering demand growth for the motor fuel.