U.S. crude futures ended lower after a choppy trading day on Thursday, as rising oil stockpiles in American storage facilities offset evidence that OPEC and other big exporters were cutting production.
Prices retraced early gains as traders grew less concerned about mounting tensions between the United States and Iran.
“Traders seem to have concluded the dispute between the U.S. and Iran over a recent missile test represents more of a war of words than the start of a military confrontation that would put supplies from the wider Persian Gulf at risk,” Tim Evans, Citi Futures’ energy futures specialist, said in a note.
U.S. President Donald Trump said on Thursday in a tweet that Iran had been “put on notice” after the country tested a ballistic missile.
U.S. light crude settled down 34 cents to $53.54, after climbing by $1.07 on Wednesday. Brent crude was down 23 cents at $56.57 a barrel by 2:33 p.m ET (1933 GMT) after settling up $1.22 in the previous session.
Earlier, both Brent and WTI traded at their highest levels since early January on indications producers from the Organization of the Petroleum Exporting Countries and other exporters were following through on their agreements to cut output to reduce a global supply glut.
The curbs follow an agreement last year by OPEC and other exporters to reduce supplies by a combined 1.8 million barrels per day (bpd) to prop up prices that remain at about half their mid-2014 levels.
A Reuters survey this week found that most key oil producers were sticking to the deal, with compliance above 80 percent.
Russian oil output contracted in January by 100,000 bpd, Energy Ministry data showed on Thursday.
“The current sentiment is bullish,” said Tamas Varga, analyst at London brokerage PVM Oil Associates, but added, “We are still firmly within the ranges. I think buyers will shy away if the market jumps another dollar.”
Higher crude prices in recent months, meanwhile, have prompted U.S. energy producers to drill for more oil.
U.S. crude oil inventories rose last week by an unexpected 6.5 million barrels to 494.76 million barrels, the Energy Information Administration said on Wednesday. The build in crude stocks far exceeded analysts’ expectations for an increase of 3.3 million barrels.
Gasoline stocks climbed by 3.9 million barrels, compared with analyst expectations of a 1 million barrel gain.
Inventories in the United States, the world’s biggest oil consumer, have been near record highs for much of the past year and domestic production is rising as U.S. companies drill for shale oil.