Oil pared its first weekly gain in a month as Libya sought to increase output and Russia ruled out military retaliation against Turkey for downing its jet near the Syrian border.
Futures fell as much as 2.3 per cent in New York, trimming this week’s advance to 4.2 per cent.
Libya said it’s making progress to resume crude production at two fields after more than a year including Sharara, the OPEC member’s biggest.
Russian President Vladimir Putin signaled his country will cooperate with the broader alliance against Islamic State after meeting his French counterpart in Moscow on Thursday.
Oil has slumped about 36 per cent in the past year as US crude inventories climbed to near a record and the Organisation of Petroleum Exporting Countries pumped above its quota to defend market share.
Iran has said it will announce plans to expand output by 500,000 barrels a day when OPEC members gather to discuss policy December 4th in Vienna.
"If Libya resumes oil production, it can be another factor that will add to the global supply glut," Hong Sung Ki, a commodities analyst at Samsung Futures in Seoul said by phone. "Geopolitical tensions between Russia and Turkey are limited in moving the actual prices of oil."
West Texas Intermediate for January delivery dropped as much as 98 cents to $42.06 a barrel on the New York Mercantile Exchange and was at $42.08 at 8.30am London time.
There was no close Thursday because of the US Thanksgiving holiday and transactions will be booked Friday.
Prices have declined 9.6 per cent this month. Libyan Supply Brent for January settlement was 48 cents lower at $44.98 a barrel on the London-based ICE Futures Europe exchange. The contract is up 0.8 per cent this week. Total volume was about 13 per cent above the 100-day average.
A Libyan committee has met to resolve issues that have shut export terminals and crude supply from Sharara and Elephant, according to Mustafa Sanalla, the chairman of National Oil Corp in Tripoli.
The fields have a combined capacity of 440,000 barrels a day and could resume full production within seven days of a decision to restart operations, he said by phone Thursday.
Libya, with Africa’s largest oil reserves, is exporting about 260,000 barrels a day. While Russia began economic retaliation against Turkey in response to the shooting down of a Russian fighter jet near the Syrian border on Tuesday, it ruled out military action.
Putin and French President Francois Hollande said the two sides would exchange information about which areas of Syria are controlled by the country's moderate anti-government groups.
Societe Generale SA cut its 2016 Brent forecast as it expects the market's re-balancing to accelerate during the second half of the year. Brent will trade at $53.75 a barrel next year, down 65 cents from its previous estimate, analysts including Michael Wittner said in an e-mailed report.
