U.S. oil prices fell on Thursday, as refinery maintenance threatened to raise record inventories of crude and sources said an OPEC meeting on production levels was unlikely without Iran's participation.
An initial rally in the dollar after the European Central Bank cut its key lending rate to zero also pressured oil, although crude prices recovered from their lows as the euro rebounded on ECB comments that more cuts were unlikely.
Brent crude futures were down $1.02 at $40.05 a barrel, having earlier this week peaked at $41.48, the highest level since Dec. 9.
U.S. crude settled at $37.84 a barrel, down 45 cents, or 1.18 percent, having hit $38.51 on Tuesday, also its highest since Dec. 9.
On Wednesday, oil rallied as much as 5 percent, with U.S. crude hitting three-month highs of $38.51 a barrel as a big gasoline inventory drawdown overshadowed record high crude stockpiles.
But some analysts said last week's gasoline stock build, which was triple expectations, could be partly due to the market transitioning from winter-grade to summer-grade motor fuel. They also said the U.S. refinery maintenance season could push crude stockpiles to even bigger highs.
Global demand for crude oil typically dips when refineries around the world enter seasonal maintenance in spring, ahead of peak summer demand.
Some analysts fear that despite the big U.S. draw, gasoline stocks remained high on both sides of the Atlantic, which could undercut a sustained recovery in oil prices. Crude's 30 percent rise in the last month was partly based on hopes that drivers would soak up the surfeit in the fuel.
"The gasoline drawdown is great but we still have record high crude stocks. The question is whether we are just going to depend on falling U.S. production to bring that down, or OPEC will also get its act together on an output freeze," said David Thompson at Washington-based commodities brokerage Powerhouse.
Traders were also focused on a potential agreement to rein in output between producers from the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, and non-OPEC exporters including Russia.
A meeting to discuss a global pact on freezing production is unlikely to take place in Russia on March 20, sources familiar with the matter say, as OPEC member Iran is yet to say whether it would participate in such a deal.
"The idea that meeting may not happen at all is definitely weighing on the market," said Tariq Zahir, who mostly trades in U.S. crude oil spreads at Tyche Capital Advisors in New York.
Most analysts expect the oil glut to last into 2017 or even 2018, resulting in low prices.
Only by 2020 is there a consensus for prices to rise towards $70 a barrel, based on low investment in production.
The European Central Bank cut all three of its interest rates and expanded its asset-buying program on Thursday, delivering a bigger-than-expected cocktail of actions to boost the economy and stop ultra low inflation becoming entrenched.
Surprising markets, it cut its main refinancing rate to zero from 0.05 percent.