US oil settles at $47.64 a barrel, up 31 cents, or 0.65 pct

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Oil prices were modestly higher on Friday in a volatile session, as traders reacted to comments from Fed Chair Janet Yellen and reports of missile activity in Saudi Arabia.

The market was taking its cues from the movement in the dollar, which has been choppy following Yellen's remarks.

At one point, crude benchmarks were up as much as 2 percent before drifting lower.

Brent futures for October were up 0.44 percent at $49.89 a barrel. U.S. crude was at $47.60 per barrel, up 27 cents, or 0.55 percent.

The U.S. crude oil rig count was at 406, Baker Hughes said on Friday. That compares to 675 a year ago.

The market was primed to react to Yellen's speech in Jackson Hole, Wyoming, as her remarks initially caused a big rally in the dollar, which caused oil to slip. Later, the dollar pared those gains, with the dollar index at one point down as much as 0.5 percent. It was lately up 0.3 percent.

Oil prices touched the day's highs after reports of Yemeni missiles hitting Saudi Arabia's oil facilities, traders said. Saudi state TV reported that a projectile fired from Yemen hit a power relay facility in Najran, in the southern part of Saudi Arabia.

Sal Umek, senior analyst at the Energy Management Institute in New York, said he did not see much effect on the market from the Saudi Arabia reports.

"At the end of the day, what is driving the market right now is short covering, being that it's Friday and the dollar taking a hit," he said.

US oil rig count unchanged -Baker Hughes

Oil and natural gas traders have also been watching for the impact of Tropical Storm Gaston, saying it could possibly become a major hurricane in the Gulf of Mexico, taking out further supply.

A weaker dollar can be seen as supportive for oil prices as it makes dollar-traded oil cheaper for countries using other currencies, potentially spurring demand.

Oil prices were still on track for weekly losses of more than 1 percent as the Saudi energy minister watered down expectations that the world's largest producers might agree next month to limit their output.

"We don't believe any significant intervention in the market is necessary other than to allow the forces of supply and demand to do the work for us," Saudi Arabian Energy Minister Khalid Al-Falih told Reuters late on Thursday.

Members of the Organization of the Petroleum Exporting Countries will meet on the sidelines of the International Energy Forum, which groups producers and consumers, in Algeria from Sept. 26-28.

— CNBC's Berkeley Lovelace contributed to this report.