Oil prices were higher on Wednesday on signs that Russia and OPEC producers are delivering on promised supply reductions, though weekly U.S. supply data suggested a crude glut may persist.
Oil prices extended gains after U.S. National Security adviser Michael Flynn said the White House is putting Iran "on notice" following its recent ballistic missile tests. Traders told CNBC heightened tensions raise fears that the United States will pull out of the Iran nuclear deal or impose new sanctions, which could effect Tehran's ability to continue ramping up oil production.
Russia cut production in January by around 100,000 barrels per day (bpd), according to data seen by Reuters. A day earlier, a Reuters survey found high compliance by OPEC with agreed cuts.
"Any hopes of a sustained recovery in price will depend on increasing efforts by OPEC to curb output though the prospect of an upside breakout will be undermined by the budding revival in U.S. crude production," Stephen Brennock of oil broker PVM said.
The cuts by Russia and the Organization of the Petroleum Exporting Countries follow last year's agreement to lower supplies by a combined 1.8 million bpd, to prop up prices which are still half their level of mid-2014.
A Russian cut of 100,000 bpd would be a third of Moscow's pledge to reduce its output by 300,000 bpd. However, Russia has said that its planned output reduction would be gradual.
OPEC has implemented most of its reduction. A Reuters survey on Tuesday found that OPEC members in January have delivered on about 82 percent of their deal to lower supply by 1.16 million bpd.
"With data now coming out for the first month affected by the OPEC and non-OPEC output cuts, it appears fairly safe to say that compliance with the pledged reduction has been relatively high," analysts at JBC Energy said in a report.
JBC estimates OPEC delivered on 88 percent of its pledged reduction. Petro-Logistics, a company which tracks OPEC supply, also estimates compliance has been high.
The U.S. Energy Information Administration reported stockpiles of U.S. crude rose by 6.5 million barrels. Analysts expect crude stocks to rise by 3.3 million barrels.
Gasoline stocks were up by 3.9 million barrels, compared with analysts' expectations in a Reuters poll for a 1 million-barrel gain. Distillate stockpiles, which include diesel and heating oil, increased by 1.6 million barrels, versus expectations for a 903,000-barrel drop, the EIA data showed.
The larger-than expected build exacerbated concerns that efforts to cut production globally may not be sufficient to reduce a supply glut.
"It was a very bearish report on several fronts, from the large across-the-board builds in the major categories, and the continued decline in refinery runs," said John Kilduff, partner at energy hedge fund Again Capital LLC in New York. "Crude oil imports were elevated again, as well, with the Gulf Coast seeing a big increase in crude oil inventories."
Countering that bearish data, crude stocks at the Cushing, Oklahoma, delivery hub fell by 1.2 million barrels, EIA said.
— CNBC's Tom DiChristopher contributed to this report.