Oil prices fell nearly 4 percent on Wednesday on renewed concerns about an oil glut sparked by rising U.S. crude inventories in storage and OPEC saying output cuts must be implemented to avoid the prospect of a growing surplus.
Prices extended losses after the Federal Reserve delivered an anticipated U.S. interest rate hike. The rate hike boosted the dollar, making greenback-traded fuel imports more expensive for countries using other currencies at home.
International Brent crude futures were down $1.68, or 3 percent, at $54.04 per barrel at 2:41 p.m. ET (1928 GMT). U.S. West Texas Intermediate (WTI) crude oil futures settled down $1.94, or 3.7 percent, to $51.04 a barrel.
Inventories at the Cushing, Oklahoma, delivery hub rose once again, the sixth build in seven weeks, data from the Energy Information Administration showed on Wednesday.
Crude inventories overall fell by 2.6 million barrels in the last week, compared with analyst expectations for a decrease of 1.6 million barrels, the data showed.
However, traders pointed to most of the declines being in PADD 5, or the West Coast, saying that did not truly reflect supply demand fundamentals of the energy complex. Crude stocks in PADD 5 fell about 2.3 million barrels.
"This week really doesn't point to an effort to clear inventories from PADD3 (Gulf Coast) like many expected," said Troy Vincent, analyst at New York-based ClipperData.
"The decline in stocks is predominately from the West Coast, while Gulf Coast imports actually ticked higher and stocks only fell 400,000 bpd."
The Organization of the Petroleum Exporting Countries on Wednesday signaled a growing oil supply surplus next year unless members implement their deal to curb output from record levels and outside producers also deliver on cutback pledges made last weekend.
In a monthly report, OPEC said that without cuts the 2017 overhang would reach 1.24 million barrels per dday, about 300,000 barrels per day higher than the forecast in its previous report.
OPEC pumped 33.87 million bpd last month, according to figures OPEC collects from secondary sources, up 150,000 bpd from October.
Saudi Energy Minister Khalid al-Falih said on Wednesday it would take some time for the market to rebalance after the deal between OPEC and rival producers to limit supplies.
"We expect the impact ... in terms of fundamentals to take several months to be reflected on the market," Falih told reporters.
OPEC and 11 producing countries from outside the group agreed to cut almost 1.8 million barrels a day of production in an effort to end two years of oversupply and cheap oil.
Oil traders said prices were further depressed by a report from the International Energy Agency (IEA) released Tuesday, which said OPEC pumped about 34.2 million barrels per day (bpd) of crude in November, 500,000 bpd above OPEC's official estimate, which was already a record.
If true, that would undermine the effort by the OPEC and other producers to cut output.
The IEA said global oil supply rose to a record 98.2 million bpd in November, with OPEC's production offsetting declines elsewhere. This stands against expectations of 96.95 million bpd of global oil demand for the fourth quarter of 2016.
Despite this, the IEA said that due to firm demand increases, oil markets could show a shortfall of 600,000 bpd early next year if producers stick to their reduction plans.