Brent crude oil futures traded near three-month lows on Friday as the pressure of a persistent supply glut quashed any optimism about a price recovery.
An early rally in Brent crude proved difficult to sustain, as focus returned to an overhang that has cut prices by more than 10 percent this month.
"The drivers that pushed prices lower are still there," said Hamza Khan, head of commodity strategy at ING, pointing to the strong dollar and increasingly efficient U.S. shale operations in addition to the overhang of physical oil. "Any rally today is going to have a difficult time finding traction."
The front-month Brent crude contract was 8 cents higher at $44.26 a barrel. The contract finished 4 cents higher on Thursday.
U.S. WTI for December delivery was trading 34 cents lower at $40.20 per barrel. It ended down 21 cents on Thursday, after dipping to $39.89 during the previous session, its lowest since Aug. 27. The December contract expires Friday afternoon.
The January contract for WTI was also 23 cents lower at $41.50 a barrel.
The strength of the U.S. dollar, which was trading near seven-month highs, has a negative impact on crude prices, as it makes oil and other commodities more expensive for holders of other currencies.
Dollar strength, along with market fundamentals, have hammered commodities from coal to copper over the past year. Crude futures are already down around 60 percent since mid-2014 as supply has exceeded demand by 700,000 to 2.5 million barrels per day, creating a glut that analysts say will last well into 2016.
The overhang has seen Iraqi crude grades selling as low as $30 per barrel, while official selling prices from Nigeria have fallen to their lowest in more than a decade.
U.S. crude futures have been particularly battered, with data from the Energy Information Administration showing an eighth straight week of stock builds.
A growing discount between the front month and forward contracts, which was trading near a record wide $8 per barrel, has sparked talk of traders storing more crude in the hope of delivering later at higher prices.
Market data suggests oil traders are preparing for another downturn in prices by March 2016, as forecasts for an unusually warm winter dent demand and Iran prepares for post-sanctions crude oil exports.
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