Oil prices rose in quiet trading on Thursday, supported by strong U.S. economic data, a pause in the U.S. dollar rally and optimism that crude producers would abide by an agreement to limit output.
The gains were curbed by an unexpected rise in U.S. crude inventories last week and moves by Libya to boost output over the next few months.
Brent futures for February delivery rose 59 cents, or 1.1 percent, to $55.05 a barrel by 2:36 p.m. ET (1928 GMT), having previously finished 89 cents lower.
U.S. West Texas Intermediate crude settled up 46 cents, or 0.88 percent to $52.95 a barrel, after closing the previous session down 81 cents.
The dollar index, which tracks the greenback against a basket of six currencies was roughly flat as investors took profits after its rise to a 14-year peak earlier this week. A weaker dollar makes greenback-denominated commodities including oil cheaper for holders of other currencies.
New orders for U.S.-made capital goods rose more than expected in November amid strong demand for machinery and primary metals, suggesting some of the oil-related drag on manufacturing was starting to fade.
U.S. data also showed the economy grew faster than previously estimated in the third quarter, notching its quickest pace in two years.
Optimism that OPEC and non-OPEC oil producers would stick to a deal to cut output by almost 1.8 million bpd from Jan. 1 also supported prices, which have added to gains since the deal was agreed on Dec 10.
"The announcements coming from Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Iraq, and Russia are all encouraging signs that they will abide by the cut and hopefully other countries will follow suit," OPEC member Kuwait's oil minister Essam Abdul Mohsen Al-Marzouq told reporters.
Ric Spooner, chief market analyst at CMC Markets in Sydney, said he was also upbeat about upcoming cuts: "It is a safe assumption particularly in the early stages that OPEC and non-OPEC producers will abide by the agreement to curb output."
"If you look at where the biggest production cuts are coming from, it's largely about the Gulf states and Russia — this gives me even more comfort there will be material compliance," he said.
That came as Russian Energy Minister Alexander Novak on Wednesday said trust between oil producing countries is important if the global deal to curtail output is to succeed.
On the downside for oil prices, U.S. crude stocks posted a surprise build last week, climbing by 2.3 million barrels compared with an expected decline of 2.5 million barrels, government data showed on Wednesday.
Libya's National Oil Corporation (NOC) said it hoped to add 270,000 barrels per day (bpd) to national production after it confirmed on Tuesday that pipelines leading from the Sharara and El Feel fields had reopened. NOC said that Sharara output reached 58,000 bpd on Wednesday.
"Short-haul crude oil supplies to Europe are increasing with the restart of Libya and that will provide a cap for European crude oil strength," Olivier Jakob, managing director of PetroMatrix consultancy, said.
Libya recently doubled output to 600,000 bpd, but Jonathan Barratt, chief investment officer at Sydney's Ayers Alliance, said the country had the capacity to ramp up production to 1.2 million bpd.