Oil prices have lifted after an initial slump after data showed US crude inventories increased for the fifth straight week but gas stocks declined.
Benchmark Brent crude is trading 0.6 per cent up at $55.38 per barrel while West Texas Intermediate (WTI) is up 0.61 per cent at $52.49.
The increase came after prices initially fell to lows of $54.55 and $51.57 per barrel after unexpectedly large increases to US fuel inventories as reported by the American Petroleum Institute (API), which were later confirmed by the Energy Information Administration (EIA)'s official figures.
The EIA said US stockpiles were at 13.83m barrels, which is well above the 2.7m expected, said David Morrison, market strategist at Spread Co. He noted there was little market reaction to the EIA update as it also reported a decline in gasoline stocks, which helped offset the crude build.
"Nevertheless, the news is helping to keep a lid on crude prices," Morrison said. "At the beginning of the week Brent and WTI were testing resistance at $57 and $54 respectively. Now there’s a danger that support around $54 and $51 could be broken."
"This could knock the wind out of the equity market rally and spark a rash of profit-taking," he added.
The API figures reported crude inventories rose to 14.2m barrels in the week to 3 February compared with Reuters' analysts' forecasts of an increase of 2.5m barrels.
"The API delivered a Goliath crude inventory number... The second highest on record. The reaction was predictable as the herd, already nervous from the previous day's price action, turned en masse and ran off the cliff," said Jeffrey Halley of futures brokerage Oanda.
Craig Erlam, analyst at Oanda, said US shale producers that were previously priced out are now returning as the Organisation of the Petroleum Exporting Countries (Opec) and non-Opec producers work to cut the oversupply.
"This is preventing oil getting back above $60 a barrel and instead, we’re now seeing its trading back around the lows of the range it’s held in since the start of December," he said.
"The sell-off since API reported its numbers on Tuesday has been quite substantial and should EIA confirm its analysis, we could see the lower end of the ranges come under serious pressure."
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