Brent crude edged up on Friday, supported by strong economic data from Germany that lifted the oil demand outlook and as worries about a quick return of Iranian supplies eased.
The upwards lift has been sufficient that both Brent and US crude futures are set to post a weekly gain of more than 3 percent despite having been dragged down by record levels of Saudi output and US inventories earlier this week.
"The reaction was severe for one session but we appeared to strike that off," said Michael McCarthy, chief strategist at CMC Markets in Sydney.
"That suggests the increase in supply has been priced in at current levels."
May Brent crude rose 21 cents to USD 56.78 a barrel by 0335 GMT, on track for its third weekly gain in four weeks. US crude for May was down 6 cents at USD 50.73, but the front-month price is set to rise for the fourth straight week.
Global stock markets rose after German industrial output and trade data showed Europe's largest economy improving in February. US jobless claims data also signalled a stronger labour market in the world's top oil consumer. [MKTS/GLOB]
"The manufacturing PMIs that we've seen in the last fortnight has to some extent given some comfort that the situation was not as bad as perhaps the oil market was reflecting," McCarthy said of the recent economic data indicating a better outlook for global oil demand.
Comments from Iran's top leader on Thursday also raised doubts about a deal being worked out anytime soon with world powers on its nuclear programme and an imminent return of its oil supply to global markets.
Iranian Supreme Leader Ayatollah Ali Khamenei demanded that all sanctions on Iran be lifted on the same day as any final agreement, while the United States maintains its position that sanctions will only be removed gradually.
"If the agreement can be reached it's likely to take a very long time and so the possibility of Iranian oil coming back to the oil markets any time soon is not as imminent as perhaps we were pricing two weeks ago," McCarthy said.
In Yemen, crude exports will more than double this month from March despite the chaos as it diverts crude from its Aden refinery amid a worsening security situation. The Yemeni government sold a prompt crude cargo to a Chinese trader, raising April exports to 2.8 million barrels.
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