Oil prices fell on Wednesday after earlier shrugging off a report from the U.S. Energy Information Administration that showed the nation's crude inventories rose and gasoline stocks increased sharply.
Futures fell early in the day after builds in U.S. inventories reinforced expectations that increasing shale output this year would reduce the impact of production cuts by OPEC and other major exporters. However, they turned positive after the EIA report amid market strength.
Again Capital founding partner John Kilduff said there was little to cheer in the report, but oil futures can't fight the strength on Wall Street on a day when the Dow crossed 20,000 for the first time ever and markets were broadly higher.
"It was a very bearish report, and it's a cloud over this market, but it's no asset class left behind at the moment," Kilduff said.
U.S. crude stockpiles rose by 2.8 million barrels in the week through Jan. 20, matching analysts expectations and roughly in line with an earlier report from the American Petroleum Institute.
U.S. gasoline futures fell to a session low after EIA reported gasoline stocks rose by 6.8 million barrels, compared with analysts' expectations in a Reuters poll for a 498,000-barrel gain. It pared losses shortly after the report came out.
Distillate stockpiles, which include diesel and heating oil, increased by 76,000 barrels, versus expectations for a 1 million-barrel drop, the EIA data showed.
Oil prices have found support in recent weeks from plans by the Organization of the Petroleum Exporting Countries and other producers to reduce output.
Around 1.5 million barrels per day (bpd) has already been taken out of the market from about 1.8 million bpd agreed by oil majors starting on Jan. 1, energy ministers said on Sunday, as producers look to reduce oversupply.
Bernstein Energy said global oil inventories declined by 24 million barrels to 5.7 billion barrels in the fourth quarter of last year from the previous quarter. The amount remaining equates to about 60 days of world oil consumption.
But as OPEC is cutting, U.S. shale output is rising.
U.S. oil production has increased by more than 6 percent since mid-2016, although it remains 7 percent below its 2015 peak. Output is back to levels reached in late 2014, when strong U.S. crude output contributed to a crash in oil prices.
President Donald Trump's promise to support the U.S. oil industry has encouraged analysts to revise up their forecasts of growth in U.S. oil production, which is already benefiting from higher prices.
A push by Republicans in the U.S. House of Representatives for a shift to border-adjusted corporate tax could help push U.S. crude prices higher than global benchmark Brent, triggering large-scale domestic production, according to Goldman Sachs.
— CNBC's Tom DiChristopher contributed to this report.