NEW YORK (Reuters) - Oil prices ended the week lower in choppy trading on Friday, snapping two weeks of gains, as a frenzy of speculation about a possible deal between top oil producers clashed with concerns about a growing supply glut.
After a volatile week's trading, much is riding on Sunday's meeting between Venezuelan Oil Minister Eulogio Del Pino and his Saudi counterpart Ali al-Naimi in Riyadh, after Del Pino's discussions with the Qatari and Omani ministers this week.
As cash-strapped Venezuela tries to rally support for concerted action between members of the Organization of the Petroleum Exporting Countries to boost prices, Sunday's meeting is seen "make or break" for a possible deal, said Tim Evans, energy futures specialist at Citi Futures.
Adding to this week's rollercoaster ride in prices was the sudden liquidation of a $600 million leveraged fund bet on falling prices.
Investors were also weighing a string of conflicting indicators on Friday as the dollar .DXY recovered some of the ground lost over the past two days while investors continued to fret about growing oversupply, with U.S. inventories hitting record highs last week amid concerns about a slowing global economy.
The pickup in the market earlier this week was not really warranted, Gene McGillian, senior analyst at Tradition Energy said, referring to the market seemingly brushing aside extremely bearish inventory data earlier this week. [EIA/S]
"Today when the dollar tried to push up, which I attribute mostly to a little weekend covering, you started to see some sellers come back in the oil markets," he said.
Global benchmark Brent crude futures LCOc1 settled down 40 cents, or 1.2 percent at $34.06 a barrel, after trading between $35.14 and $33.81.
U.S. crude futures CLc1 closed 83 cents, or 2.6 percent lower, at $30.89 a barrel, after touching a high of $32.45. The contract fell slightly lower to $30.63 in post-settlement trading.
Prices briefly turned positive after data showed U.S. energy firms this week deepened their oil rig cuts in the seventh week of declines, to the lowest levels in nearly six years.
Both contracts were stuck in a narrow $1.50 range through the session but ended lower as hopes of an OPEC-led production cut that boosted prices in January have faded and concerns about a global supply glut have returned.
In a sign that low prices are having a limited impact on production, only around 100,000 barrels per day of oil production has been shut in globally to date - about 0.1 percent of global output, industry research group Wood Mackenzie said on Friday.
Morgan Stanley warned on Friday that a rebalancing in the oil market may not occur until mid-2017.
As markets try to balance themselves, it will likely lead to further volatility as investors close excessive positions, ABN Amro said in a note.
In a sign that optimism had not fully returned to the market, money managers cut their bullish wagers on U.S. crude oil in the week to Feb. 2, data from the U.S. Commodity Futures Trading Commission (CFTC) showed on Friday.
(This version of the story corrects percentage change for U.S. oil to down 2.6 percent in paragraph 9)
Additional reporting by Ahmad Ghaddar in London and Henning Gloystein in Singapore; Editing by Marguerita Choy and Lisa Shumaker