U.S. crude West Texas Intermediate (WTI) dropped 11 cents to $40.43 a barrel as of 0731 GMT, after edging up in earlier trades. It ended down 21 cents at $40.54 on Thursday, after dipping to $39.89 during the previous session, its lowest since August 27, according to the report.

Front-month Brent futures for January lost 6 cents to $44.12 a barrel, after finishing up just 4 cents on Thursday at $44.18.

"Oil markets are really moving range bound ... mainly because fundamentals have yet to change," said Daniel Ang, an investment analyst at Phillip Futures Pte Ltd.

"Markets are a bit fearful that Iranian oil could come in," he added.

Read alsoUAE Energy Minister predicts oil market will get balanced on its ownAccording to various estimates, global oil supplies exceed demand by roughly 0.7-2.5 million barrels per day creating a glut that analysts say will last well into 2016.

Market data suggest that oil traders are preparing for another downturn in prices in March 2016, expecting an unusually warm winter and Iran's resurgent crude exports hitting global markets after sanctions are lifted.

Read alsoUkraine finds alternative to Russian fuel – Demchyshyn"Prices will have high volatility in 2016 and particularly in the first half there is a high risk of falling prices," Kang Yoo-jin, commodities analyst at NH Investment and Securities based in Seoul, said in a report.