WTI oil fades the drop to $55, upside favored on tightening supplies

• WTI oil is better bid above $55.00, having settled at the highest level since Nov. 21 on Friday. 
• Tightening supplies and dovish Fed favor further gains in the near-term. 

WTI oil is currently trading at $55.38 per barrels, having hit a low of $54.96 earlier today.

The path of least resistance is to the higher side, courtesy of tightening supplies. The Organization of the Petroleum Exporting Countries (OPEC) output fell in January by the largest amount in two years, according to a Reuters survey.

Russian oil output also declined to 11.38 million barrels per day in January - down by 35,000 barrels per day from the October 2018 level. The decline, however, missed the deal's target by 15,000 barrels per day.

Further, Bakers Hughes data released on Friday showed the operating oil rigs in the US fell to their lowest in eight months.

What's more, the US economy seems to have found the sweet spot again - the labor market is still running hot, while the anemic wage growth justifies the Fed's recent dovish turn. The dollar, therefore, could remain on the defensive, helping oil set new multi-month highs.

The bullish case, however, would weaken if the US-China negotiations falter.