Oil prices were on track to a weekly loss, with Brent hitting two-month lows on Friday, weighed by potentially higher Iraqi crude exports and bearish U.S. inventory data from earlier in the week.
Crude futures fell nearly 2 percent for a second day in a row as Iraq's oil exports looked to rise in July, according to loading data and an industry source. If confirmed, it would put OPEC's second-largest producer back on track of supply growth after two months of output declines.
U.S. crude inventories are at a historically high 519.5 million barrels for this time of year, despite a ninth straight week of drawdowns last year, U.S. government data showed on Wednesday.
Adding to that, market intelligence firm Genscape reported on Thursday a build of 725,176 barrels for the week to July 19 at the Cushing, Oklahoma delivery point for U.S. crude futures, traders said.
"These large and increasing stocks will not only up the likelihood of additional commercial short hedges, but will also encourage the commercials to defer long hedges given the comfort of more than ample supply availability," said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.
The market will be looking for a weekly reading on the U.S. oil rig count at 1:00 p.m. EDT (1700 GMT) to gauge output.
Brent crude was down 68 cents, or 1.5 percent, at $45.52 a barrel by 11:07 a.m. EDT (1507 GMT). It fell as low as $45.36 earlier, the lowest since May 11.
U.S. West Texas Intermediate crude slid 56 cents, or 1.3 percent, to $44.19 a barrel.
Both benchmarks were on track to a weekly loss of about 4 percent.
Falling prices in the United States have also encouraged traders to send U.S. oil to Europe, adding to supply in the region.
This has helped counterbalance force majeure and pipeline attacks that had cut some 700,000 barrels per day in Nigerian production.
Oil product stocks in the United States, Europe's Amsterdam-Rotterdam-Antwerp hub and Singapore rose for a second consecutive week, growing by 2.35 million barrels, data from energy consultancy FGE showed.
"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.
Even so, some market participants braced for volatile trading.
"Our view is that WTI will fall to $40 in the near term but rebound to $60 or even $70 by the year-end," said Salvatore Recco, who helps oversee about $2 billion of client money at Gravity Investments in Denver, Colorado.
Source: Business Standard