Oil prices rose on Friday after Opec+ said it would keep its oil output policy unchanged.
However, futures remained on track to record their biggest weekly loss since November, amid prospects of a pause in the Israel-Gaza war and a weakening fuel demand outlook.
Brent, the benchmark for two thirds of the world’s oil, dropped 1.37 per cent to close at $77.33 a barrel.
West Texas Intermediate, the gauge that tracks US crude, declined 1.54 per cent to settle at $72.28 a barrel.
The Opec+ alliance of oil producing countries noted a high compliance rate on existing production cuts at its meeting on Thursday.
The group, which has voluntary production cuts of 2 million barrels per day in place until March, said it would “continue to closely assess market conditions” and stands ready "to take additional measures at any time”.
The next Opec meeting is on April 3.
“We expect those countries that joined in on the cuts to decide on whether to continue in early March,” said Giovanni Staunovo, a strategist at UBS.
“What has already been made clear last year is that the reversal of those cuts will be gradual,” he said.
Mr Staunovo, who expects the cuts to be extended into the second quarter, said the oil market was “slightly undersupplied” in January despite mild weather in the Northern Hemisphere.
The unwinding of the 2.2 million bpd of voluntary cuts would leave in place 3.66 million bpd of supply curbs agreed earlier.
This week, Saudi Aramco, the world’s largest oil exporting company, abandoned a plan to increase its production capacity to 13 million bpd by 2027, from 12 million bpd currently.
The decision raised concerns about the kingdom’s outlook of future crude demand.
“To the degree the oil market fundamentals were a factor in the Saudi decision … it would be due to both non-Opec supply and the rate of demand growth,” said Ann-Louise Hittle, vice president, oil markets at Wood Mackenzie.
Production from non-Opec countries rose 2.1 million bpd last year while demand grew 1.6 million bpd, “leaving little market share” for Opec and Saudi Arabia, she said.
Encouraged by high oil prices, US oil and gas producers boosted their output by 1 million bpd last year, higher than analysts’ expectations of an increase of 600,000 bpd.
Oil prices closed more than 2 per cent lower on Thursday on unverified reports that Israel had agreed to a ceasefire proposal.
Bloomberg previously reported that talks were progressing towards a deal to temporarily halt the Israel-Gaza conflict and release civilian hostages held by Hamas.
Geopolitical tensions in the Red Sea and the broader Middle East are threatening to impede global trade.
Attacks on merchant ships in the Red Sea by Yemen's Houthi rebels, who say they are acting in solidarity with Palestinians in the Israel-Gaza war, are forcing companies to divert to longer routes – mainly around the Cape of Good Hope at the southern tip of Africa.
However, it has so far not impacted oil production in the Middle East, which accounts for roughly a third of the world's crude output.
