US crude settles 1.3% higher at $51.50 on optimism over non-OPEC output cuts

US oil drillers adds rigs for sixth straight week

Oil prices rose about 1 percent on Friday, trading within a narrow range, on hopes that non-OPEC producers meeting in Vienna over the weekend would agree to cut output to bolster OPEC's own agreement to limit production.

Still, a strong U.S. dollar sapped some of the price strength, and both crude benchmarks remained nearly 2 percent below the highs reached after the Organization of the Petroleum Exporting Countries announced plans to cut production late last month.

On Saturday, oil ministers from OPEC countries will meet non-OPEC producers in Vienna to seek help in curbing a global glut.

Brent crude for February delivery was up 29 cents at $54.18 a barrel by 2:35 p.m. ET (1935 GMT), after rising 1.7 percent on Thursday. The contract hit its highest since July 2015 at $55.33 on Monday.

U.S. crude for January delivery settled up 66 cents, or 1.3 percent, at $51.50 a barrel.

'OPEC is trying to thread 10 needles in a row'

Both contracts were on track for their first weekly loss in four weeks.

Gains in the U.S. dollar index versus a basket of currencies, which makes oil more expensive to many of the world's buyers, helped pull prices back from the highs reached earlier in the day.

Also on Friday, Baker Hughes reported its count of oil rigs operating in U.S. fields rose by 21 to 498, marking the sixth straight week rose. At this time last year, the rig count stood at 524.

Russia has said it would cut 300,000 barrels per day, meaning other non-OPEC producers combined would need to pledge the same amount to lower output by the 600,000 bpd OPEC wants. Russia's No.2 oil producer Lukoil said on Friday it was ready to take part in the output cut commitment.

Azerbaijan has said it will come to the Austrian capital with proposals for its own reduction, while Kazakhstan's energy minister said they may offer to freeze output at last month's level.

Still, questions remained over such output plans.

Russia plans to hold additional talks on Friday with some OPEC and non-OPEC nations to discuss unresolved issues related to the planned cut in oil output, two Russian sources told Reuters.

"We see event odds as skewing towards a slightly positive price impact," Macquarie Research analysts said in a note.

"That said, we believe a status quo outcome that keeps the November deal intact is the most probable scenario and hinges on a repeated commitment from Russia (300,000 bpd). In addition to potential cuts from Oman, this scenario could also include softer commitments due to natural declines (e.g. Mexico) or other less credible cuts."

OPEC last week agreed to slash production by 1.2 million bpd in the first half of 2017.

Saudi Arabia and Iraq plan to supply full contracted volumes of crude to Asia in January, in an effort to retain market share in Asia, but the former ordered supply cuts to U.S. and European buyers.

— CNBC's Tom DiChristopher contributed to this report.