Prices have been buoyed by a new round of supply cuts from the Organization of the Petroleum Exporting Countries and its allies that began in January.
USA crude stocks rose less than expected last week, while gasoline stocks increased and distillate inventories fell, the Energy Information Administration said on Wednesday. Later in the year, it expects markets to remain fairly balanced due to a combination of waivers expiring for importers of Iranian oil, and because of a roll-over of the OPEC+ agreement into H2 2019.
Daniel Yergin, vice chairman of IHS Markit, agreed: "I think the oil price is moved by what happens with the overall financial markets; it means sentiment will have a bigger impact on the oil price, [and] a big surge in US oil production becomes bearish for the global market so you get more and more complicated feedback loops".
Fritsch of Commerzbank said the Venezuelan issue could still drive oil higher.
Technically, the crude oil price remains within the rising channel in place on the chart throughout this year so far and its climb could well extend towards the channel resistance line, now around $56.30.
USA crude oil inventories C-STK-T-EIA climbed by 1.3 million barrels in the week that ended February 1 to 447.21 million barrels, data from the Energy Information Administration (EIA) showed on Wednesday.
West Texas Intermediate crude for March delivery slipped 0.4 percent to $53.81 a barrel on the New York Mercantile Exchange as of 10:50 a.m. London time. The global benchmark crude was at an $8.36 premium to WTI for the same month. Distillate fuel production increased, averaging 5.1 million barrels per day. Brent reached $63.63 a barrel, the highest since December 7, while WTI climbed to $55.75 a barrel, the strongest since November 21. OPEC supply fell last month by the largest amount in two years, a Reuters survey last week found.
"The fact that USA crude oil and gasoline stocks rose more sharply than expected, as reported by the API after close of trading yesterday, is weighing on prices", said Carsten Fritsch, analyst at Commerzbank.
"Because the number was a little disappointing, it played into the slowing demand scenario", said Phil Flynn, oil analyst at Price Futures Group in Chicago.
"The market seems to be turning on renewed worries that there doesn't seem to be a lot of progress on the U.S".
United States energy firms last week cut the number of oil rigs operating to their lowest in eight months as some drillers followed through on plans to spend less on new wells this year. "China trade talks", said Gene McGillian, director of market research at Tradition Energy in Stamford, Connecticut.
In his State of the Union address, U.S. President Donald Trump said a trade deal was possible with China.