Oil prices edged higher on Friday but remained below $57 a barrel after three days of heavy profit-taking among some speculators. US light sweet crude traded up 17 cents to $56.67 a barrel, having previously closed below $57 for the first time in two weeks.
Prices have tumbled 7 percent from an all-time high of $60.95 a barrel touched on Monday. But losses are likely to be limited by persistent concerns about tight market conditions this winter and after Opec's president said $53 was the "ideal price" for US crude, a higher level than other members mooted earlier this year.
"(The fall) is a bit of an over-reaction," said Mitsubishi Bank's Tony Nunan. "The only rational explanation is that the speculators are taking profits after driving prices to above $60 a barrel and I would be surprised if they didn't come back in and push prices up again next week," he said.
After a volatile week, activity is likely to be muted on Friday ahead of the Independence Day holiday in the United States, for which the New York Mercantile Exchange will be closed on Monday.
This week's losses deepened after weekly US inventory data showed near-record crude imports by the world's top consumer had boosted stocks by 1.1 million barrels, despite refineries running near full tilt in order to meet growing demand.
The steep fall in prices prompted Opec to shelve discussion of a 500,000 barrel per day (bpd) output increase, President Sheikh Ahmad al-Fahd al-Sabah said on Thursday.
"There is no shortage of oil in the market," he told reporters in Washington. This would have been additional to the 500,000-bpd increase to 28 million bpd for the 10 members of Opec under quota restrictions that were agreed to this month in Vienna.
But traders have been unimpressed by talk of more crude, which they say will do nothing to resolve the refinery bottlenecks that limit the world's ability to make enough consumer fuels particularly diesel to meet rising demand.
US refinery utilisation rates rose 1.5 percentage points to 96.3 percent, boosting stocks of distillates, the high-demand fuel group that includes diesel and heating oil, the US Energy Information Administration report showed on Wednesday.
More surprising than Opec's about-face on output was Sheikh Ahmad's support of $53 oil, a rare public price target from one of the cartel's core Gulf members.
It is also well above the $40-$50 a barrel range that members had appeared to be gravitating toward this year, potentially signalling Opec's willingness to defend a higher long-term price than previously thought.
The Organisation of the Petroleum Exporting Countries (Opec) effectively abandoned its $22-$28 basket range a year and a half ago but is working to re-establish price guidelines to help it guide policy and stabilise markets.
Opec has been emboldened to raise its target by signs that higher fuel costs have not derailed global economic growth.
"Although energy prices have risen further, the expansion remains firm," the US Federal Reserve said on Thursday as it raised key interest rates for the ninth time in a row.
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