A bigger-than-expected build in U.S. crude inventories to fresh record highs pushed oil markets down after an early rally on Wednesday over concerns about production cuts in Canada's oil sands region.
U.S. crude stocks, which have been setting record highs since January, grew 2.8 million barrels last week, government data showed, about a million barrels more than analysts' expectations. Gasoline stocks also posted a surprise increase.
The data overshadowed concerns over evacuations in the Canadian province of Alberta, where a wildfire raged unchecked through the Canadian city of Fort McMurray in the heart of the country's oil sands region, prompting some companies, including Suncor Energy and Royal Dutch Shell, to cut back production.
"It's hard to see how it (the wildfire) wouldn't have a broader impact temporarily on pipeline exports," said John Kilduff, a partner at Again Capital Management in New York. "I think it was a legitimate scare that will prove transitory."
Brent crude futures were down 25 cents at $44.72 per barre, after trading as high as $46.01.
U.S. crude settled 13 cents higher, or 0.3 percent, at $43.78, after hitting a session high at $44.88. WTI also snapped a three-day losing streak.
Brent crude has fallen more than 5 percent from Friday's high in response to rising output from the Organization of the Petroleum Exporting Countries, signs of economic slowdown in the United States and Asia, and a stronger dollar.
"It would not come as any surprise if speculative financial investors were to take profits against this news backdrop," said Carsten Fritsch, analyst at Commerzbank.
While total OPEC output rose in April, outages around the world have been supporting prices. The Canada disruption adds to supply losses in Nigeria and Iraq, concern about renewed losses in Libya and fears that Venezuela's cash crunch could hit the OPEC member's output.
Some believe the rally has further to go in 2016 as the supply glut eases.
"Investor optimism for oil has markedly improved," said Nitesh Shah of ETF Securities. "We believe the gains in price are sustainable and not just driven by speculative gains."
Barclays said that "unplanned outages look unlikely to abate in the next couple of months, which have contributed to a tighter 1H16 oil market" and that "lower spare capacity, heightened disruption risk in Iraq and Venezuela, and lower supply ex-U.S. mean prices will likely average higher in Q4 than previously forecast."
The bank said that it expected Brent to average $44 per barrel this year, an upward revision of $5 from its previous outlook, and U.S. crude to average $42 a barrel this year.
In oil production, U.S. output has fallen from a peak of over 9.6 million barrels per day (bpd) in summer last year to just over 8.8 million bpd currently, triggering one of the biggest wave of bankruptcies in American corporate history.
But inventories, particularly the latest from the EIA, suggest supply is more than ample for now.
— CNBC's Tom DiChristopher contributed to this story.
Correction: This story has been updated to show U.S. crude inventories increased by 2.8 million barrels.