Oil prices pared gains on Wednesday after U.S. government data showed a smaller-than-expected decline in domestic crude inventories and weak demand for gasoline, feeding concerns about a supply glut.
Futures firmed a bit as the U.S. dollar weakened following the Federal Reserve's decision to leave interest rates unchanged. A softer dollar makes greenback-denominated commodities like crude oil more affordable to holders of other currencies.
U.S. West Texas Intermediate (WTI) crude was up 5 cents at $47.71 a barrel by 2:04 p.m. ET (1604 GMT), after earlier dipping to a five-week low of $47.30. Benchmark Brent crude was up 20 cents at $50.66 a barrel, paring earlier gains.
The U.S. Energy Information Administration (EIA) said weekly crude stocks fell by 930,000 barrels to 527.8 million, less than half the 2.3 million-barrel draw that had been forecast.
"U.S. domestic production rose again, and continues its steady climb," said John Kilduff, partner at energy hedge fund Again Capital in New York. He noted that a sharp decline in imports turned what would have been an increase in stocks into a small drawdown.
EIA data also showed gasoline stocks rose by 191,000 barrels, which was much less than the 1.3 million-barrel gain that had been forecast. However, gasoline demand slipped 2.7 percent over the last four weeks from the same period a year ago.
"This is continuing a trend since the beginning of the year in which sales have been lower and that is casting a shadow on the market and pressuring crude oil prices," said Andrew Lipow, president of Lipow Oil Associates in Houston,
"Gasoline demand is going to be the story going forward."
The data also provided an update on growth in U.S. oil production, a key factor that has kept a lid on price gains driven by output cuts elsewhere. U.S. output was up 28,000 barrels a day, according to preliminary weekly figures that are later revised.
While the market remains fixated on U.S. production, oil investors continue to watch whether producing countries have been complying with their 2016 deal to cut output around 1.8 million barrels per day (bpd) by the middle of the year.
Russia said on Wednesday that as of May 1, it had curbed output by more than 300,000 bpd since October. Moscow is contributing the largest production cut outside OPEC.
This means Russia has achieved its reduction target a month ahead of schedule, just as the latest Reuters survey of OPEC production showed compliance had fallen slightly.
OPEC compliance with its production-cutting deal slipped to 90 percent from a revised 92 percent in March largely due Angola pumping more crude oil and higher-than-expected output from the United Arab Emirates, the Reuters survey showed.
News on Tuesday that rival factions in Libya's long-simmering civil conflict had made progress toward a political solution also weighed on oil market sentiment, analysts told CNBC.
A resolution would help likely boost Libyan oil output that has regularly been curbed throughout the conflict. On Monday, Libya's National Oil Corporation reported its production rose to the highest level since December 2014.
WTI fell 2.4 percent on Tuesday, extending losses after it broke through last week's low of $48.20 a barrel, a key technical support level. In the five minutes after the price breached that level, more than 50,000 U.S. contracts traded, representing about 10 percent of total trade at that time on Tuesday.