U.S. crude posted its first weekly loss in five weeks on lingering doubts over the extent of OPEC cuts, with sentiment worsened by concerns over the economic health of the world's second-largest oil consumer China.
Despite China's oil thirst, overall exports — the country's economic backbone — declined by 7.7 percent last year in what was the second annual decline in a row and the worst since the depths of the global crisis in 2009.
Record Chinese crude imports of 8.6 million barrels per day (bpd) in December helped to buoy prices somewhat, traders said, but they could not hide underlying fears over the overall health of the world's second-biggest economy.
U.S. West Texas Intermediate (WTI) crude futures settled down 64 cents, or 1.2 percent, to $52.37. For the week, it ended about
Brent crude futures, the international benchmark for oil prices, were trading down 58 cents, or 1 percent, at $55.43 a barrel at 2:34 p.m. ET (1934 GMT) on Friday.
Exports of Chinese refined oil products last month rose nearly 25 percent year-on-year to a record 5.4 million tonnes, well above November's previous record of 4.9 million tonnes.
"China right now seems more interested in keeping capital in the country than focusing on growth overall," Phil Flynn, analyst at Price Futures Group in Chicago said.
"We have to watch this situation develop because this is one threat to what is an otherwise wildly bullish scenario for oil in the coming year."
On the supply side, there was some market support from top crude exporter Saudi Arabia, which said that its output had fallen below 10 million bpd to levels last seen in February 2015 and that it expects to make even deeper cuts next month.
Several other OPEC members, including Iraq and Kuwait, said they were implementing the deal. Separately, Russia's Energy Minister Alexander Novak said the country was starting to implement its own planned cuts, in conjunction with an agreement among non-OPEC producers to reduce output.
OPEC Secretary-General Mohammed Barkindo said on Friday he was confident oil producers would observe an agreement under which OPEC and non-OPEC producers have agreed to lower their oil output in order to support prices.
However, hard evidence of export reductions has yet to emerge, two weeks into the month in which the cuts by the Organization of Petroleum Exporting Countries (OPEC) and other producers, such as Russia, were supposed to start. Many analysts expect compliance of 50 percent to 80 percent at best.
Even if OPEC cuts its output as agreed, traders said that rising U.S. shale output and increasing supply from OPEC members Nigeria and Libya, which were exempt from the pact, might offset any reductions.
"I think the bigger issues for oil are less about demand right now and a lot more about the supply condition," said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management in Seattle.
"EIA data and our own government policies have to leave you thinking that a U.S. production response may unwind all the production cuts Saudi Arabia and others are planning."
Data from the U.S. Energy Information Administration showed crude production rose notably last week, particularly in the lower 48 states. Overall production was 8.95 million bpd last week, most since April of last year.
Oilfield services firm Baker Hughes reported on Friday its weekly count of oil rigs operating in the United States fell for the first time in 11 weeks. The count fell by 7 rigs to a total of 522, compared with the 515 oil rigs in operation a year ago.
Saudi Arabia is likely to cut heavy oil production rather than light in order to maximize revenues and as U.S. supply comes back, more light barrels will likely enter the market, Bank of America Merrill Lynch said in a note.
— CNBC's Tom DiChristopher contributed to this report.