Brent crude futures, the international benchmark for oil prices, were trading down 59 cents, or 1.2 percent, at $47.52 per barrel by 0226 GMT (3.26 a.m. ET), Reuters said.
U.S. West Texas Intermediate (WTI) crude futures were at $44.94 per barrel, down 58 cents, or 1.3 percent.
News of the production rise outweighed positive sentiment from falling crude and gasoline inventories in the United States.
"Oil prices were initially stronger of the back of the better than expected drawdown in inventories... However, the exuberance was short-lived, as the market turned its attention to another increase in U.S. production," ANZ bank said on Friday.
Read alsoReuters: Oil rises on U.S. crude stock draw, but prices remain weakU.S. crude inventories fell by 6.3 million barrels in the week to June 30, to 502.9 million barrels, according to the U.S. Energy Information Administration (EIA). Gasoline stocks fell by 3.7 million barrels, to 237.3 million barrels.
The data suggested strong demand in the United States, but this was offset by a 1 percent rise in weekly U.S. oil production to 9.34 million barrels per day (bpd). Since mid-2016, that's an increase of more than 10 percent.
The rising U.S. output comes as supplies from the Organisation of the Petroleum Exporting Countries (OPEC) rose for a second month in a row in June, according to Thomson Reuters Oil Research, despite its pledge to hold back production between January this year and March 2018.
OPEC exported 25.92 million barrels per day (bpd) in June, 450,000 bpd more than in May and 1.9 million bpd more than a year earlier.
If OPEC was unable to balance the market, change would likely be forced on it by oil prices, said Morgan Stanley.
The U.S. bank said that a WTI price of $46 to $50 per barrel would likely prevent U.S. production from rising in the mid to long-term, but that "prices will need to be in the low $40s" for U.S. output to fall significantly.
Morgan Stanley said it expected "WTI sub-$50 per barrel to mid-2018."