Brent Prices at 2-Month High

Oil prices edged higher on Friday, reaching fresh two-month highs and are on track to post the strongest weekly gains this year, as investors digested signs of an easing oversupply picture.

Brent crude futures were up 22 cents at $51.71 a barrel after reaching a fresh two-month high of $51.75 a barrel. US West Texas Intermediate crude futures were flat at $49.04 a barrel, near a two-month high of $49.24, Reuters reported. US crude and gasoline inventories fell much more steeply than expected this week and the world's biggest oil exporter Saudi Arabia said it would further reduce oil output in August.

The front of the crude oil curve jumped into backwardation, with the month-ahead trading above the subsequent month, showing investors are not expecting recent gains to last.

"Positive signs came from the draw in gasoline stocks this week, as the US moves into the peak driving season," said Ashley Kelty, oil analyst at Cenkos Securities.

Brimming US crude supplies have been a challenge to production cuts to prop up prices led by the Organization of Petroleum Exporting Countries, meaning weekly US inventory data are closely watched. Despite these signs, analysts' assessments of the oil market remained bearish.

"We believe the latest price rise is on a fragile footing," said analysts at Commerzbank, adding OPEC production was likely to rise in the coming months as the group has not officially capped output from members Libya and Nigeria.