Oil prices edged higher on a weaker dollar and diplomatic tensions in the Gulf, but Brent held below the $50 per barrel level that was breached for the first time in six weeks on Thursday.
Investors were also taking positions ahead of a meeting between OPEC and non-OPEC members in Russia on Monday at which they will discuss compliance with agreed production cuts and progress towards rebalancing an oversupplied market.
Benchmark Brent crude futures were up 24 cents at $49.54 a barrel at 0822 GMT on Friday, while U.S. West Texas Intermediate (WTI) crude futures traded at 47.09 a barrel, up 17 cents.
“The weak dollar, the rising tension between Kuwait and Iran and the upcoming meeting in St. Petersburg should all contribute to some kind of short-covering today,” Tamas Varga, senior analyst at London brokerage PVM Oil Associates, said.
The dollar index fell to the lowest in more than a year on Friday, incentivising the purchase of dollar-denominated commodities such as crude oil.
OPEC members Iran and Kuwait are embroiled in a diplomatic spat that saw Kuwait ordering the expulsion of the Iranian ambassador and other diplomats for alleged links to a “spy and terror” cell.
The expulsions were an unusual move for Kuwait, which typically avoids conflict and has worked at keeping good relations with all countries in the region.
The tensions come just days ahead of the oil producers’ meeting. OPEC, together with some non-members like Russia, has pledged to cut production by 1.8 million barrels per day (bpd) between January this year and March 2018.
The Unites Arab Emirates’ Energy Minister said on Friday he hoped that production cuts would have a significant impact in the third and fourth quarter.
Jefferies said “actions from the next OPEC/non-OPEC working committee meeting seem unlikely”.
But “if OPEC is to achieve its objective of bringing OECD inventories back to normal levels it will need to take further steps”, the U.S. investment bank added.
(Additional reporting by Fergus Jensen in Singapore; editing by Alexander Smith)