Oil prices were steady on Friday but are set for their first weekly gain in six weeks on the assumption major producers will implement deeper output cuts to offset slowing demand in China, the world's second-largest crude user.
Brent crude futures fell 9 cents to $56.25 a barrel by 0234 GMT, after gaining 1% the previous session. Brent is 3.3% higher for the week, the first increase since the week of Jan. 10.
US West Texas Intermediate (WTI) futures were down by 1 cent to $51.41 a barrel. The contract rose 0.5% on Thursday and is now 2.2% higher for the week.
Crude prices have plunged about 20% from their 2020-peaks on Jan. 8 as oversupply concerns combined with worries about large fuel demand declines in China as the country's quarantine to fight a coronavirus outbreak has halted economic activity.
However, the Organization of the Petroleum Exporting Countries and its allied producers, known as OPEC+, are considering cutting output by up to 2.3 million barrels per day in response to the demand slump.
But other analysts caution the demand impact is only limited to China so far.
"The spread of the coronavirus remains extremely fluid and while market sentiment is held at the mercy of each passing coronavirus headline, our baseline thesis remains that oil demand destruction remains largely a China story and has yet to spill over to impact global demand," said Helima Croft, head of commodity strategy at Citadel Magnus.
The market is signaling that some near-term demand for oil remains. The spread between the first-month April Brent future and the May contract has narrowed to a discount of only 1 cent a barrel on Friday from a discount of 33 cents a week ago.
The narrowing of this contango, when prompt prices are less than later-dated contracts, suggest that demand for oil is improving for Brent-related crude.
Still, some concern remains about the impact the Chinese demand slowdown may have.
The International Energy Agency (IEA) on Thursday said that first quarter 2020 oil demand is set to fall versus a year earlier for the first time since the financial crisis in 2009 because of the coronavirus outbreak in China.
The Chinese economy is expected to grow at its slowest rate since the financial crisis in the current quarter, according to a Reuters poll of economists who said the downturn will be short-lived if the outbreak is contained.