Crude supplies remain plentiful in major regions; demand growth falters in China, India.
Oil slipped on Friday, pressured by growing global stocks, while expectations that an oil output cut by producers might eventually balance the market helped to underpin prices.
Brent crude futures were trading at $55.33 per barrel at 1256 GMT, 32 cents below their last close.
Both appeared on track for losses on the week, though prices had moved higher earlier in the session in response to news that producer group OPEC could extend an output cut aimed at reining in a global supply overhang.
The Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, plan to cut output by almost 1.8 million barrels per day (bpd) during the first half of 2017, and estimates suggest compliance by OPEC is around 90 percent.
The cuts are aimed at curbing oversupply that has dogged markets since 2014.
But inventories and supplies remain high, especially in the United States
"You've got bullishness from the OPEC cuts, but the bearishness of the inventory report," Hamza Khan, head of commodities strategy at ING, said. "The question is, which of these is going to give first?"
Brent and WTI have traded within a $5 per barrel price range this year, in what has become the longest and most range-bound period since a price slump began in mid-2014.
In the United States, rising output <C-OUT-T-EIA> has helped push up crude and fuel stocks to record highs.
In Asia, oil flows into the region remain as high as they were before the production cuts, Thomson Reuters
data shows, as exporters fight for market share.
There are also signs of faltering demand growth in core markets China, India and the United States.
In India, fuel demand growth fell in January, while in China sagging car sales and soaring gasoline and diesel exports also point to a slowdown in growth. U.S. gasoline cracks slid to a one-year low on Friday on fears of excess supply and weakening demand growth.
Despite the supply glut, analysts expect oil markets to tighten in the longer term.
"In the fourth quarter of 2018, global oil demand will most likely surpass 100 million barrels per day," AB Bernstein said on Friday in a note to clients.
"If oil prices stay around $60 per barrel and GDP (gross domestic product) growth over 3 percent per annum, then oil demand growth will be stronger over the next 5 years than the previous decade. What we are witnessing is a rather surprising renaissance of oil consumption," it said.
Reporting by Henning Gloystein and Libby George