Oil Prices Fall as Focus Shifts to U.S. Output

Oil prices slipped on Friday, giving up gains from earlier in the day, as the market shifted its focus towards production increases in the United States and away from efforts by OPEC and other producers to support prices by cutting supplies.

Brent crude futures, the international benchmark for oil prices, were trading at $55.56 per barrel at 10:43 a.m. EST (1543 GMT), down 68 cents from their previous close.

U.S. West Texas Intermediate (WTI) crude futures were at 53.25 a barrel, down 53 cents. U.S. crude is poised to gain nearly 2 percent on the week.

"We're in a holding pattern at this point in time," said Mark Watkins, regional investment manager at U.S. Bank Private Client Group. "Supply is a big factor right now and you have the U.S. really filling that gap that OPEC has left open."

Prices had risen during Asian trading, though activity was thin due to the start of the Lunar New Year holiday in much of that region, including China and Singapore.

During U.S. trading, the market pulled back as traders brace for another potential uptick in U.S. production when the Baker Hughes rig count data is released at 1 p.m. EST. Growing domestic production is expected to offset proposed global cuts.

The Organization of Petroleum Exporting Countries and other producers, including Russia, agreed to cut output by almost 1.8 million barrels per day (bpd) in the first half of 2017 to relieve a two-year supply overhang.

But U.S. oil production has been rising, with the International Energy Agency forecasting total U.S. output growth of 320,000 bpd in 2017 to an average of 12.8 million bpd.

Analysts said investors who bet on rising prices were taking profit in advance of U.S. rig count data due later in the day from oilfield services provider Baker Hughes, which could signal further increases in U.S. production.

Oil research firm PetroMatrix said the rig count data, "will be a weekend risk as another surge will negatively impact the start of next week."

There were fundamental factors that impacted prices this week, such as gains in Iran's monthly oil exports in February and resilient production in Libya. A glitch in North Sea Buzzard crude production provided support.

But market participants warned of more volatility ahead as speculators react to even small developments in the physical markets.

"Given that speculative net long positions in Brent and WTI are already at a record-high level, the correction potential is therefore growing all the time," Commerzbank analyst Carsten Fritsch said in a note. (By Jessica Resnick-Ault; Additional reporting by Henning Gloystein in Singapore and Libby George in London; Editing by Bernadette Baum)