Oil prices edged higher on Tuesday propped up by a decline in the U.S. dollar and comments by Saudi Arabia that it would adhere to OPEC's commitment to cut output.
The dollar fell to a near six-week low against a basket of currencies after U.S. President-elect Donald Trump said that the strong greenback was hurting U.S. competitiveness.
A weaker greenback makes dollar-denominated crude less expensive for users of other currencies.
"The oil market is actually weaker than it looks because it is being propped up by the weak dollar," said Phil Davis, managing partner at PSW Investments in Woodland Park, New Jersey.
U.S. West Texas Intermediate (WTI) crude oil futures settled up 11 cents at $52.48 per barrel, off a session peak of $53.52.
Brent crude futures, the international benchmark for oil prices, were down 38 cents at $55.48 per barrel at 2:35 p.m. ET (1935 GMT). They earlier rose to $56.95.
U.S. crude's discount to Brent widened to its biggest in nearly five months after U.S. President-elect Donald Trump criticized a part of Republicans' corporate-tax plan, traders said.
Traders said that oil drew some support earlier Tuesday from top crude exporter Saudi Arabia, which said it would adhere strictly to its commitment to cut output under the agreement between OPEC and other producers, such as Russia.
Under the agreement, OPEC, Russia and other non-OPEC producers have pledged to cut oil output by nearly 1.8 million bpd, initially for six months, to bring supplies back in line with consumption.
Earlier gains were capped by forecasts for rising U.S. and Russian production and skepticism that the Organization of the Petroleum Exporting Countries (OPEC) as a whole would comply with its commitment to reduce supplies.
Russian oil production is expected to reach another post-Soviet record high in 2017 after a global deal to cut output expires at the end of June, according to a Reuters poll of analysts.
"Strong and rising production out of Libya, Iran, Iraq and Nigeria will be acting to negate impact of OPEC/Russia output curtailments," Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note.
Ritterbusch also noted that U.S. production was also on the upswing with last week's reported upside acceleration likely to be sustained to about 9.2 million barrels per day by the end of the quarter.
Oil exports from Iraq's southern terminals have fallen so far in January, according to loading data and an industry source, a sign that OPEC's second-largest producer is following through on the group's decision to cut output.
"The market genuinely seems quite happy here (around $55) ... but people are watching with caution as the slightest hint of this OPEC/non-OPEC agreement going wrong is going to drive the market down," said Matt Stanley, a fuel broker at Freight Investor Services (FIS) in Dubai.
Despite this, crude futures have fallen 5 percent since their early January peaks because of doubts over the oil producers' willingness to fully comply with the cuts.
Stockpiles at the U.S. delivery hub for crude futures in Cushing, Oklahoma, which the government said declined about 580,000 barrels in the week to Jan. 6, fell about 756,000 barrels in the week to Jan. 13, according to traders, citing energy monitoring service Genscape.
Traders are also watching rising U.S. output with interest, as this could offset supply cuts elsewhere.
"The market is focused on the build in U.S. production which is nearly up to 9 million bpd — up from 8.5 million bpd last June and close to 2014 production levels," said Michael McCarthy, chief market strategist at Sydney's CMC Markets.
"With U.S. crude clearly above $50 a barrel, we are getting a supply-side response which is pushing production higher," he said.