Oil prices slipped in tepid Asian trading today, dragged down by an unexpected rise in US crude inventories last week and moves by Libya to boost output over the next few months.
But the fall was curbed by a weaker dollar and optimism that crude producers would abide by an agreement to limit output to prop up markets.
Brent futures for February delivery had fallen 4 cents to $54.42 a barrel, having previously finished 89 cents lower. Prices rose to $54.69 a barrel earlier in today's session.
US West Texas Intermediate crude dropped 5 cents to $52.44 a barrel, after closing the previous session down 81 cents. It nudged up to $52.71 per barrel in initial trade today.
The dollar index, which tracks the greenback against a basket of six rival currencies, slipped as investors took profits after its rise to a 14-year peak of $103.65 earlier this week.
A weaker dollar makes greenback-denominated commodities including oil cheaper for holders of other currencies.
US crude stocks posted a surprise build last week, climbing by 2.3 million barrels compared with an expected decline of 2.5 million barrels, the US Energy Information Administration said yesterday.
Libya's National Oil Corporation (NOC) said it hoped to add 270,000 barrels per day (bpd) to national production after it confirmed this week that pipelines leading from the Sharara and El Feel fields had reopened.
NOC said that Sharara output reached 58,000 bpd on Wednesday.
Libya recently doubled output to 600,000 bpd, but Jonathan Barratt, chief investment officer at Sydney's Ayers Alliance, said the country had the capacity to ramp up production to 1.2 million bpd.
But optimism that oil producers would stick to an agreement made earlier this month to cut output by almost 1.8 million bpd from January 1 reined in the drop in prices.