WTI oil futures settled modestly lower on Friday after Baker Hughes reported its weekly U.S. oil rig count fell by just 1 rig.
The rig count has fallen every week since Dec. 12, though the pace of declines has fallen recently. The number of rigs drilling for crude in U.S. oilfields stands at 659, compared with 1,528 a year ago.
Oil fell more than 1 percent earlier on Friday as a rallying dollar and profit-taking ahead of a long U.S. holiday weekend cut short a two-day run-up in crude prices.
Heating oil, a proxy play for diesel, and gasoline slipped more than 1 percent too on concerns of outsized U.S. supply despite forecasts for a spike in driving this weekend and through Monday's Memorial Day holiday.
"No one wants to hold open positions ahead of a long weekend so books are being squared, bringing some consolidation," said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt.
Worries that fewer U.S. oil rigs were being idled after a broad rebound in crude prices since early April further weighed on sentiment.
The dollar rose to a two-week high ahead of the holiday weekend after a U.S. inflation report indicated underlying price pressures that could prompt an interest rate hike later in the year.
A stronger greenback makes dollar-denominated commodities less affordable to holders of the euro and other currencies. Traders said oil was particularly vulnerable to profit-taking after the gains of the past two days where Brent had risen 4 percent and U.S. crude 6 percent.
The American Automobile Association said U.S. road travel was expected to reach a 10-year high over Memorial Day, suggesting strong fuel consumption over the next three days.
But analysts said gasoline supplies may be too high to see any bullish impact from such usage.
"The refineries have cranked out more gasoline and fuel products than required in the near term and that's weighing on the petroleum complex," said Andrew Lipow, president of Lipow Oil Associates in Houston.