US oil ends 9 cents lower, or 0.26 pct, at $34.57 a barrel

U.S. oil prices settled lower after seesawing throughout Thursday, as ballooning U.S. crude inventories and a lack of new progress to temper supply capped bullish sentiment.

Brent futures were up 12 cents to $37.04 a barrel, while U.S. crude futures closed 9 cents lower, or 0.26 percent, at $34.57 a barrel.

Natural gas prices hit the lowest level since February, 1999.

Crude prices rebounded from early weakness after Russia's largest oil producer Rosneft said one of its pipelines that served as a link for delivering crude to China was damaged by power failure. The pipeline is expected to be fixed in 24 hours, Rosneft said.

Some analysts argued the rally this week was defying fundamentals.

"Crude seems to be increasingly discounting bearish news and data including rapidly rising inventory levels," said Vikas Dwivedi, analyst at Macquarie Capital. "Market fundamentals, in our view, suggest the rally is too early, and we expect crude to retrace to the $30 per barrel range."

In under two months, Brent and U.S. crude futures have gained about $10, or around 30 percent, a barrel from 12-year lows of between $26 and $27.

The rally has also been fueled by pledges from the Organization of the Petroleum Exporting Countries to work with other major oil producers to freeze production at January's highs.

But the agreement struck in February by some big producers, led by Russia and Saudi Arabia, is expected to do little to reduce the oversupply, not least because output in the first month of the year was at, or near, record highs.

"Prices must fall once again to reach bottom in a way that really shuts down production. I don't think a freeze is the solution," Natixis commodities strategist Abhishek Deshpande said.

"That is the only true way of really turning around prices sustainably and for good...once that happens, there will be a true turning point and, for me, that kind of bottom is still below $25."

A Gulf OPEC delegate said Thursday Gulf countries prefer that a meeting of oil producers be held in the first half of April, preferably in Doha, or another Gulf City. More meetings had been expected to take place in March.

Data from market intelligence provider Genscape suggested stockpiles at the main delivery hub for U.S. crude futures have risen to a new peak above the record high the government reported on Wednesday, traders who saw the data said.

Genscape's data showed Cushing stockpiles rose 1.1 million barrels to 68.7 million barrels during the week to March 1, above the 66.3 million barrels in the U.S. government data for week ending Feb. 26.

U.S. crude stockpiles as a whole rose 10.4 million barrels to an all-time high of 517.98 million barrels last week, government data showed

Around 1 million to 2 million barrels of crude is being produced globally every day in excess of demand, contributing to a 70 percent fall in oil prices since mid-2014.

Slowing U.S. output and signs of financial distress among the higher-cost producers that might signal further supply cuts have offset stockpile builds somewhat.

U.S. crude output fell for a third month in December, as struggling oil companies succumb to the price rout.

Seasonally, the second quarter of the year tends to be one of the weakest, as spring refinery maintenance cuts crude demand.

Reuters data shows on average over the last 15 years, Brent has gained 4.9 percent in the second quarter, compared with an average gain of nearly 7.5 percent in the third quarter, usually the strongest in terms of price performance.

Market watchers have said there has been more bullishness spreading through the market.

"The market has suddenly started to focus on bullish headlines. This has created huge inflows, buying from hedge funds," said Oystein Berentsen, managing director of crude at Strong Petroleum in Singapore.