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US oil settles down 45 cents, at $56.16 a barrel

Oil futures closed lower on Wednesday as renewed fighting in Yemen pushed Brent higher while U.S. crude prices seesawed after a second straight week of production declines despite higher inventories.

U.S. crude for June delivery settled down 45 cents, or 0.8 percent, at $56.16 a barrel. Meanwhile, Brent for June delivery was up 70 cents at $62.80 a barrel.

U.K. North Sea Brent, the more globally-used benchmark for crude, rose more than 1 percent as warplanes from a Saudi-led coalition bombed Yemen a day after Riyadh said it was ending airstrikes against Iranian-allied Houthi rebels there.

In New York, U.S. crude futures reeled between negative and positive territory as players weighed government data that showed production declines versus higher stockpiles.

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Oil rallied hard and fast in the first two weeks of April on worries about fallout from the fighting in Yemen, which sits beside shipping lanes for Middle East crude. Signs that U.S. oil production may be coming off after months of increases added to gains.

But with global demand for oil still lagging output, the run-up has fizzled this week, although Brent remains up 14 percent on the month. U.S. crude has risen more, gaining 18 percent since the end of March.

"It's a choppy trade that's making it difficult for people on both the long and short side," said Tariq Zahir, an oil bear at Tyche Capital Advisors in Laurel Hollow, New York.

Brent rose as the White House said the situation in Yemen remained unstable and more work needed to be done in the region.

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U.S. crude rebounded from the session low after the government-run Energy Information Administration reported a drop of 18,000 barrels per day in output last week, the second straight week of lower production.

"It's another decline in production and the market is certainly anxiously awaiting more of those, at least people who are on the long side," said Dominick Chirichella, senior partner at New York's Energy Management Institute.

But the EIA also reported that U.S. crude stockpiles rose by 5.3 million barrels last week, higher than the 2.9-million-barrel build expected by analysts in a Reuters survey, to reach a record 489 million barrels.

Stocks at the key delivery point of Cushing, Oklahoma, rose by 789,000 barrels, the EIA added. Energy markets intelligence firm Genscape said tanks at Cushing were nearly 80 percent full.