U.S. oil futures closed down 25 cents at $60.50 a barrel on Wednesday despite crude stockpiles slipping for a second straight week, but traders and analysts said inventories were still hefty for this time of year and could undercut the market's advance.
Crude futures have risen between 20 and 25 percent over the past six weeks on signs that increasing demand ahead of the peak U.S. driving season could ease a supply glut.
U.S. government data showed oil inventories fell 2.2 million barrels in the week to May 8 to below 485 million barrels, compared with analysts' expectations for an increase of 386,000 barrels. Gasoline and distillate stockpiles also declined.
Oil futures rallied right after the Energy Information Administration released the data, but quickly pulled off their highs, with U.S. crude briefly slipping into the negative, as analysts struggled to explain a report that seemed to have few bearish qualities.
"We are still about 20 percent higher than a year ago in terms of inventories," said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow in New York.
"We need to lose at least 1.5 million barrels a day from production to balance the market, but that seems not likely with the marginal cuts in U.S. output so far and OPEC looking to produce as much as it can into this market."