"A renewed rise in Cushing, Oklahoma, inventories and a rise in domestic crude oil production added to the bearish tone of the report," said John Kilduff, a partner at Again Capital in New York.
Still, the oil market is bracing for a hit to global supplies from renewed U.S. sanctions on Iran. Brent remains on course for its fifth consecutive quarterly increase, the longest stretch since early 2007 when a six-quarter run led to a record-high price of $147.50 a barrel.
Several big buyers of Iranian crude, such as a number of Indian refiners, have signaled they will wind down their purchases, yet the exact impact of the loss of Iranian barrels on the global market balance is not clear.
U.S. officials, including President Donald Trump, are trying to assure consumers and investors that enough supply will remain in the oil market while requesting producers raise their output.
"We will ensure prior to the re-imposition of our sanctions that we have a well supplied oil market," Washington's special envoy for Iran, Brian Hook, told a news conference at the United Nations General Assembly on Tuesday evening.
In an earlier speech at the UN, Trump reiterated calls on OPEC to pump more oil and stop raising prices. He also accused Iran of sowing chaos and promised further sanctions on the country.
The so-called 'OPEC+' group, which includes the world's biggest producer Russia, met over the weekend but did not see the need to add new output as the market is well-supplied currently.