NEW YORK -- Oil dipped on Friday as investors took profits on the market's surge to seven-month highs and worried about higher production with prices hovering near $50 a barrel.
A stronger dollar also weighed on demand for dollar-denominated oil from holders of other currencies. The dollar spiked after U.S. Federal Reserve Chair Janet Yellen said an interest rate hike was probably appropriate in coming months.
A three-day weekend for the United States, owing to Monday's Memorial Day holiday, further discouraged investors from holding bullish bets.
"People are worried crude production will come roaring back at these prices," said Phil Flynn, energy markets analyst at the Price Futures Group in Chicago.
"But I also think we are down because of higher interest rate concerns and the longer weekend," Flynn said. "You don't want to be long on a $50 position when oil could be below $48 by the time the new week opens."
Brent crude was down 36 cents, or 0.7 percent, at $49.23 a barrel by 2:07 p.m. EDT. It hit $50.51 on Thursday, its highest since early November.
U.S. crude slipped by 23 cents, or 0.5 percent, to $49.25. It rose to $50.21 in the previous session, its highest since early October.
For the week though, oil prices were set to rise from gains in recent sessions. Brent was headed for a weekly gain of 1 percent and U.S. crude about 3 percent.
Oil pushed past $50 after supply disruptions from Canadian wildfires and militant attacks in Nigeria helped cut global daily output by 4 million barrels.
"Most of these outages are unlikely to last," UBS analyst Giovanni Staunovo said, anticipating the resumption of supply and higher production by the Organization of the Petroleum Exporting Countries to pressure prices.
Current prices could also spur more U.S. shale output, analysts said.
"Shale's total production costs are around $48-$50 a barrel," said Tony Nunan, oil risk manager at Tokyo's Mitsubishi Corp. "There will be producers who make money at $50."
Dominick Chirichella, senior partner at New York's Energy Management Institute, said U.S. output could rise by an estimated 300,000 to 400,000 barrels per day as shale producers put drilled but uncompleted wells, or DUCs, into production.
The slide in the U.S. oil rig count has virtually halted as well, with just 2 rigs idled this week, data from industry firm Baker Hughes showed on Friday.
For the coming week, investors will be watching the outcome of an OPEC meeting for signs of more output from the Saudis and Iranians who are locked in a battle for market share.