Oil prices pulled back on Thursday, paring gains after the U.S. reported mixed data showing the pace of inventory falls slowed, triggering worries that the supply overhang would last for longer.
A fall in production, however, helped underpin prices.
Brent crude, the global oil benchmark, fell 1.2% to $51.59 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 1.2% at $48.49 a barrel.
The U.S. Energy Information Administration published weekly data on Wednesday showing oil inventories were down less than expected, falling 1.8 million barrels. The Wall Street Journal's survey of 13 analysts had estimated a decrease of 2.2 million barrels. The previous week inventory fell by a steeper 5.2 million barrels.
"Although U.S. commercial stocks are some 34 million barrels below the highest level seen last August, more hard work is needed to bring them down to the five-year average of 1.2 billion barrels," said Tamas Varga at brokerage PVM.
The data also showed the first fall in U.S. production in 13 weeks, however, which was supportive of prices, he said.
U.S. production has been steadily rising since the start of the year, reaching its highest level since August 2015 at 9.31 million barrels a day earlier this month.
Analysts and investors were focused on next week's meeting of the Organization of the Petroleum Exporting Countries and other major producers including Russia, where the countries are expected to agree to extend production cuts that were agreed to late last year.
"Markets seem to be holding their breath ahead of the OPEC meeting next week," said Michael Poulsen, oil risk manager at Denmark-based Global Risk Management.
The 1.8 million barrels a day cut has yet to make a notable dent in global supplies. Inventories continue to sit above five-year averages, the level that OPEC wants oil stocks to return to in hopes of boosting prices, which remain less than half of where they were three years ago.
"If OPEC decides to extend the production cuts at least until year's end, as is generally anticipated, and then largely implements the cuts, the global oil market will be significantly undersupplied in the second half of 2017," said Commerzbank in a daily note.
The bank said that it expects compliance may falter if the deal is extended, however, as OPEC countries face losing further market share to U.S. shale oil producers.
Nymex reformulated gasoline blendstock--the benchmark gasoline contract--fell 1.1% to $1.58 a gallon. ICE gasoil changed hands at $458.00 a metric ton, down $5.50 from the previous settlement.
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Oil prices swung between gains and losses on Thursday as investors weighed declining crude stockpiles in the U.S. against signs of a broader oversupplied market.
Light, sweet crude for June delivery was recently up 19 cents, or 0.4%, to $49.27 a barrel on the New York Mercantile Exchange, reversing losses that led prices as low as $48.05 earlier in the session. Brent, the global benchmark, was recently up 24 cents, or 0.5%, at $52.45 a barrel.
Wednesday data from the U.S. Energy Information Administration showed that the amount of crude, gasoline and diesel fuel in storage declined in the week ended Friday. However, the 1.75 million barrel decline in crude stockpiles fell short of analyst estimates for a 2.2 million barrel draw.
U.S. production has been steadily rising since the start of the year, reaching its highest level since August 2015 at 9.31 million barrels a day earlier this month. Wednesday's data showed the first fall in U.S. production in 13 weeks, lending some support to prices, said Tamas Varga at brokerage PVM.
"Although U.S. commercial stocks are some 34 million barrels below the highest level seen last August, more hard work is needed to bring them down to the five-year average of 1.2 billion barrels," said Mr. Varga.
Increasing activity from U.S. shale producers has undermined the attempt by the Organization of the Petroleum Exporting Countries to lessen the global supply glut by cutting its own output this year.
"I think it's still all about these ample U.S. supplies and the slug of oil that seems to be waiting in the wings from the shale fields," said John Kilduff, founding partner of Again Capital.
Participants in the agreement between OPEC and other major oil producers to cut output, such as Algeria, Russia and Saudi Arabia, have voiced support for extending the deal at their meeting this month. But the market remains unconvinced that it will have the desired impact on oil inventories, especially as prices have fallen this year amid ongoing production cuts.
"A lot will hinge on next week's meeting," said Jim Ritterbusch, president of Ritterbusch & Associates. "[But] I have trouble building a scenario that would take us much above $50."
Gasoline futures rose 0.4% to $1.6090 a gallon, and diesel futures rose 0.7% to $1.5446 a gallon.
--Biman Mukherji contributed to this article.
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(END) Dow Jones Newswires
May 18, 2017 11:40 ET (15:40 GMT)