Brent crude futures rose towards $94 a barrel on Friday after a three-day slide pulled prices to their lowest since 2012, but the overall tone remains bearish, amid ample supply.
The crude benchmark is set to end lower for the fourth week in five, having fallen more than 15 per cent this year as global supplies have remained high despite conflict in the Middle East.
"I think the market will continue to push prices lower because of concerns over the glut, but I think the market is (also) being complacent about the risks," said Jonathan Barratt, chief investment officer at Ayers Alliance in Sydney.
"I feel there's a lot of geopolitical risk out there and it could get worse."
The turmoil in Iraq sent Brent to a nine-month high of $115.71 a barrel in June, but prices have fallen since, with no disruptions to global oil supply and Libyan output even rising.
New tensions in the Middle East are cropping up, however. Turkey's parliament authorised the government on Thursday to order military action against Islamic State as the insurgents tightened their grip on a Syrian border town, sending thousands more Kurdish refugees into Turkey.
Brent for November delivery was up 33 cents at $93.75 a barrel by 0643 GMT. But the contract is down more than $3 for the week, having hit $91.55 on Thursday, its lowest since June 2012.
US November crude added 48 cents to $91.49 per barrel. It has lost around $2 this week, its steepest weekly fall in a month. It hit $88.18 in the previous session, its lowest point since April 2013.
NON-FARM POSITIONING
Some investors may be betting on a softer US jobs number for September that could sap the dollar's strength and boost commodities, such as oil, said Ric Spooner, chief market analyst at CMC Markets.
"We might be seeing some positioning or buying as a defence against the risk of the nonfarm payrolls being skewed to the downside," said Spooner. A weaker greenback makes dollar-priced commodities cheaper for buyers using other currencies.
But economists polled by Reuters forecast that US nonfarm payrolls probably rose by 215,000 last month against 142,000 in August.
Some analysts say only a cut in output by the Organization of the Petroleum Exporting Countries may rescue oil prices as expectations rise that they will agree to do so at their meeting next month in Vienna.
While some OPEC countries are calling for supply cuts, however, other core members are betting winter demand will revive the market, suggesting the group is no closer to any collective steps.
"I think once we get down to $85-$90 for Brent, one would imagine that OPEC would be beginning to talk about tightening supply," said CMC Markets' Spooner.
Saudi Arabia's move on Wednesday to cut official oil sale prices (OSPs) to Asian customers helped to send prices sharply lower this week. The move was seen as a strong sign it is trying to compete for crude market share and keep markets well supplied.
But changes in Asia OSPs have tended in the past to be the result of demand for Saudi Arabian crude, not a driver of it, Morgan Stanley analysts said.
"We acknowledge other factors are at play that could change the historical relationship, but we do not see evidence that this latest adjustment is an effort to lift production, avoid production cuts, or punish other producers," the analysts said in a research note.