While many expect global oversupply of oil to ease in the near term, huge amounts of crude remain in vessels at sea and storage tanks on land as the rebalancing takes longer than some had anticipated, CNBC reported.
"The narrative of a balanced oil market in the second half of 2016 has so far been an illusion," UBS oil analyst Giovanni Staunovo said.
"Supply might actually increase in the near term with the further return of disrupted production and higher Middle East production, while demand growth is set to slow in emerging Asia."
Brent crude briefly fell to a more than two-month low of less than $46 per barrel before rebounding to $46.40, 20 cents higher. The contract closed 2.1% lower on Thursday, and was on track for a decline of 2.5% for the week.
US West Texas Intermediate traded as low as $44.25 a barrel before bouncing back to $44.81, 6 cents above Thursday's settle. It ended the previous session down 2.2% and was on track to close the week about 2.5% lower.
In the Middle East, Iraq's oil exports are set to rise in July, according to loading data and an industry source, putting supply growth from OPEC's second-largest producer back on track after two months of decline.
Exports from southern Iraq in the first 21 days of July have averaged 3.28 million barrels per day, according to loading data tracked by Reuters and an industry source. That would be up from 3.18 million bpd in June.
The rise came as a report by BMI Research on Friday said fundamentals in the Asian diesel market remain weak, as demand for the fuel continues to wane in key Asian markets.
EghtesadOnline: Crude futures were on track for weekly losses on Friday as investors reassessed US data on oil stocks and excesses in oil products in Europe and Asia.