[LONDON] Oil prices fell on Wednesday after a new build in US crude stock levels put a global glut back in focus, cutting short a rally that pushed up prices by about 19 per cent over the past four sessions.
The rebound increased speculation that prices may have hit a bottom, after a seven-month rout slashed oil futures by nearly 60 per cent and prompted major energy firms to cut spending on new production.
But a report from the industry group American Petroleum Institute showing US crude stocks rose more than 6 million barrels last week pushed prices down on Wednesday.
Brent was 95 cents lower at US$56.76 a barrel by 1132 GMT, after gaining almost 6 per cent on Tuesday and off a near six-year low of US$45.19 reached in mid-January. US crude futures were down US$1.72 at US$51.33 a barrel.
The fall in prices "makes perfect sense after the marked increase since Friday. A degree of reversal should be expected given stock builds globally," said Gareth Lewis-Davies, senior oil strategist at BNP Paribas The US government's Energy Information Administration (EIA) is expected to release its data on stocks at 1530 GMT on Wednesday.
Hans van Cleef, senior energy economist at ABN Amro bank in the Netherlands, said that investors were selling oil futures to take advantages of the recent rally, ahead of the EIA announcement this afternoon.
"We've seen a steep recovery in the past few days, so some profit taking doesn't sound too strange in my view," he said.
The dollar, the currency in which oil futures are traded, rose against a basket of currencies by 0.22 per cent to 93.8, making dollar traded commodities more expensive.
The outlook for oil demand has also been muddied by data showing China's services sector grew at the slowest pace in six months in January.
A sharp drop in the number of US oil rigs and a wave of budget cuts by major energy companies has led to speculation that global oil production would fall faster than expected.
"Prices are looking for a level to stabilise around for a few weeks or months. It's looking like it could be in the fifities," said Richard Mallinson, an analyst at Energy Futures.