Oil prices pared losses on Feb. 28, after data showing a build in U.S. crude inventories was tempered somewhat by a drop in U.S. crude production in December.
U.S. crude inventories rose by 3 million barrels (bbl) for the week ending Feb. 23, compared with analyst expectations for a build of 2.1 million bbl. Gasoline stocks also rose surprisingly.
"We had another pretty sizable build, and with that it kind of seemed like this recent bull market had the carpet pulled out from underneath it," said Phillip Streible, senior market strategist at RJO Futures in Chicago.
In a separate, monthly report, the U.S. Energy Information Administration said crude production in the month of December dipped to 9.95 million bbl, a 108,000 bbl/d drop from November.
U.S. West Texas Intermediate crude fell 29 cents to $62.72/bbl, a 0.5% decline, as of 12:03 p.m. CST (18:03 GMT). Brent crude futures for the most active May contract were down 56 cents at $66.07/bbl.
Also in the monthly report, the EIA revised its November crude production figures upward to a record 10.057 million bbl/d.
Soaring U.S. production, which has risen by a fifth since mid-2016, has kept a lid on oil prices this year, even as OPEC maintains its supply cuts.
"We’ve got a lot more oil to produce and we'll be through that 11 million bbl/d threshold much sooner than expected," said Streible.
The entire energy complex was led lower by gasoline futures after a surprise build in U.S. gasoline stocks, which rose by 2.5 million bbl, compared with expectations for a 190,000 bbl drawdown. U.S. gasoline futures fell 1.7% to $1.77 a gallon.
The rise in inventories came even as refineries boosted activity in the most recent week.
"In spite of refiners undergoing maintenance, they continue to process more crude compared to previous years adding to gasoline and diesel supply," said Andrew Lipow, president at Lipow Oil Associates in Houston.
Prices were pressured earlier after three of the world's top consumers of crude-China, India and Japan-reported a slowdown in monthly factory activity.
The U.S. dollar hit a one-month high Feb. 28, putting additional pressure on crude. A stronger dollar makes oil more expensive for holders of other currencies.