At 4:05 pm (0805 GMT), New York's main contract, light sweet crude for delivery in February was down 84 cents to 42.61 dollars a barrel from 43.45 dollars in New York Thursday. There was no Nymex oil futures trading Friday.

"It is because of the warm weather in the US," said Eswaran Ramasamy, the Singapore-based director for energy information provider Platts.

"It is relatively warm and this ... means there will be a build-up in stocks," he said.

Winter conditions in the United States, the world's biggest user of oil, will continue to dictate the direction of crude futures, dealers said.

The US government's latest petroleum stock report showed crude oil inventories eased 800,000 barrels to 295.1 million in the week ended December 24.

Distillates -- mostly heating fuel and diesel -- fell 800,000 barrels to 119.1 million. Heating fuel stockpiles alone dropped 1.0 million barrels to 48.9 million.

Gasoline inventories unexpectedly rose, climbing 900,000 barrels to 212.3 million.

Prices also remain at the mercy of geo-political factors with any terror attacks on oil kingpin Saudi Arabia likely to push up the market, dealers said.

"As much as the oil markets would love to put terror risks behind it, geo-political realities continue," said Phil Flynn, energy analyst with Alaron Trading in Chicago.

"Terror activity in Saudi Arabia and the risks are extremely high," he said.

Two car bombings in Riyadh last week targeted the Saudi interior ministry and a special forces building, the latest in a wave of attacks by suspected Al-Qaeda militants in the country.