Brent crude futures fell further below $112 a barrel on Friday on concerns that faster-than-expected inflation in China will limit room for further policy easing to boost growth in the world's second-biggest oil consumer.
Still, production cuts in top oil exporter Saudi Arabia, which pushed Brent prices to their highest in nearly three months in the previous session, kept losses in check.
China's annual consumer inflation Rate accelerated to a seven-month high of 2.5 percent in December, triggering profit-taking in oil and stocks.
"China's inflation was hotter than expected which might add a little bit of downside risk and some investors may be cashing in profits," said Ben Le Brun, market analyst at OptionsXpress.
Front-month Brent futures shed 27 cents to $111.60 per barrel by 11.36am UAE time, but were on track for their third straight weekly gain. US crude was little changed at $93.82 per barrel, poised for a fifth weekly increase.
Oil prices gained support this week from better-than-expected trade numbers from China, relief after the short-term resolution of the US fiscal crisis and data showing a sharp drop in US crude imports in the last week of 2012.
But the gains in both contracts were smaller than in previous weeks, suggesting underlying concerns. US crude gained less than 1 percent while Brent added less than 0.5 percent.
Traders said investors this quarter will focus on further talks between US lawmakers to resolve the debt crisis as well as seeking cues on the global economy amid expectations that world growth in 2013 may be higher than 2012.
A drop in oil supplies from the Middle East may keep prices well supported in the next few weeks.
OPEC's top producer slashed oil production by 700,000 barrels per day (bpd) to 9 million bpd during the last two months of 2012, according to industry sources. Major customers for Saudi crude said the cuts were driven by lower demand.
Saudi Arabia says it favours an oil price of about $100 a barrel, but recent reports suggested that the market is well supplied and that output from North America will grow rapidly over the next two years.
Flows of oil through Yemen's main crude export pipeline have stopped again after it was blown up by unknown attackers on Thursday morning, government and oil industry officials said.
Yemen resumed oil pumping on December 31 at a rate of around 70,000 barrels per day (bpd) after the latest repairs to the pipeline, which used to carry around 110,000 bpd of Marib light crude to an export terminal on the Red Sea before a spate of attacks began in 2011.
Oil prices may also get a boost from a brightening global economic outlook.
The euro zone economy will recover later in 2013 and there are already signs of stabilisation, the European Central Bank said on Thursday after it unanimously held interest rates at a record low.
China's export and import growth rebounded more strongly than expected in December, suggesting a rebound in economic activity and early signs of an increase in global demand for its goods.
Exports grew 14.1 percent versus analyst expectations of 4 percent and November's 2.9 percent increase, while imports grew 6 percent compared with analyst's forecasts of 3 percent and November's zero increase.
"Chinese trade data for December gave further confirmation of a mild turnaround in the economic fortunes of the world's most populous country," JBC Energy said in a report.
"In line with generally encouraging readings, preliminary figures for crude and oil product imports also ticked higher."
In the United States, data showed that initial jobless claims rose last week although the jobs market continues to grow at a moderate pace.
