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US oil settles up 46 cents, or 1.12 pct, at $41.60 a barrel

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Oil prices steadied on Friday amid short-covering after a week-long selloff but were on track to end the month about 15 percent lower on persistent glut concerns.

Slower economic growth and high inventories in crude and refined oil products have pressured Brent and U.S. West Texas Intermediate (WTI) crude futures some 20 percent lower from their 2016 highs, technically placing both in bear market territory.

The two benchmarks hit April lows on Friday before paring losses on what traders described as short-covering by investors taking profit on bearish bets placed over the past week.

Also on Friday, Baker Hughes reported the number of oil rigs operating in U.S. fields rose by 3 to 374 last week, marking the fifth straight increase in a row. At this time last year, drillers were running 664 rigs.

A three-week low in the dollar also supported oil, making commodities denominated in the greenback, such as crude, more affordable to holders of the euro and other currencies.

Brent crude oil futures were down 21 cents at $42.49 by 2:39 p.m ET, down 0.49 percent on the day.

U.S. West Texas Intermediate (WTI) crude settled up 46 cents, or 1.12 pct, at $41.60 a barrel, and last rose 34 cents to $41.48 a barrel, but was set to end the month near its biggest decline since July 2015.

Cheap crude has led refiners to produce more fuel worldwide, adding to a market already bloated with supply. Weak refining margins led to dismal earning in the second quarter for oil majors such as ExxonMobil, BP and Royal Dutch Shell.

"Doubts are rife as to whether the oil supply imbalance is indeed slowly drawing to an end," Stephen Brennock of oil brokerage PVM, said.

Data showing weaker-than-expected growth in the U.S. economy also cast a shadow on potential oil consumption growth.

"The major portion of the downside price acceleration during the past couple of weeks has related to the fundamental deterioration," said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.

"We are maintaining a bearish posture while at the same time suggesting that additional crude price declines of around $4 barrel from current levels could require a few more weeks."

Oil could see technical support in the near-term after Brent and WTI's drop below the 200-day moving average earlier on Friday, some traders said. A breach of those levels prompt algorithmic and automated trades covering short positions, they said.

Oil analysts in a Reuters survey this week also said they expected higher prices for this year based on demand growth.