AMSTERDAM: Oil prices fell around two percent on Friday, and were set to end Brent's longest multi-week rally in 16 months following profit taking and the return of oversupply concerns.
Benchmark Brent crude futures were down $1.03 at $55.97 a barrel at 1320 GMT, set for a 1.8 percent loss on the week and snapping a five-week winning streak that was the longest since June 2016.
US West Texas Intermediate (WTI) crude was at$49.49, down $1.30 or 2.6 percent on the day. It was set to close the week down more than 4 percent, the biggest weekly loss in four months.
Russia on Friday clarified remarks made by President Vladimir Putin about the oil market earlier this week, saying he did not propose extending a global oil output cut deal but said he recognised it was a possibility.
The prospect of extended oil production cuts by the Organization of the Petroleum Exporting Countries and other producers led by Russia had supported prices in recent sessions.
Saudi Arabia's energy minister said on Thursday he was "flexible" about prolonging the production-curbing pact until the end of 2018.
However, concerns linger about growing US crude exports, incentivised by a hefty WTI discount to Brent prices.
"We have a couple of bearish factors like a new record for US crude exports, the reopening of Libya's biggest oilfield, a new year high in US crude production and the recent strength of the US dollar," said Frank Schallenberger, head of commodity research at LBBW in Stuttgart.
A stronger dollar also led to further losses in the oil market on Friday. The dollar hit a 10-week high after data showing the largest gain in US wages since December 2016 bolstered bets on an interest rate hike by year-end.
"I expect Brent to drop below $55 a barrel and WTI below $50 in the next couple of days," Schallenberger said.
US government data showed this week that crude exports had risen to a record of nearly 2 million barrels per day.
Investors were also wary of tropical storm Nate shutting down some oil production in the Gulf of Mexico ahead of its expected arrival in the area as a hurricane on Sunday.
"The biggest impact (from Nate) could be on gasoline prices, depending on how many refineries are forced to shut down. But I don't think we will see another bull run," Schallenberger said.
In the Gulf of Mexico, BP and Chevron were shutting production at all platforms, while Royal Dutch Shell and Anadarko Petroleum suspended some activity. Exxon Mobil, Statoil and other producers have withdrawn personnel.
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