U.S. gasoline, distillate stocks increase but OPEC/Russia-led supply cuts lend market support.
Oil prices fell on Wednesday after a surprise rise in U.S. inventories of refined products in what the market interpreted as a sign of flagging demand.
Brent crude futures were down 48 cents at $62.38 a barrel by 1002 GMT, down 2 percent since last Wednesday, while U.S. crude futures were off 46 cents at $57.16 a barrel.
With global equities under pressure from sliding technology stocks and the U.S. bond market suggesting investors are cautious about the outlook for economic growth, industrial commodities such as crude oil
and copper are feeling the pinch this week.
Supply cuts by the Organization of the Petroleum Exporting Countries, Russia and other producers that were extended last week to all of next year have helped lift Brent prices by more than 40 percent since June.
"The turn-down in risk sentiment is a nice justification for why you might want to pare down some of the long positions taken going into the OPEC meeting," London Capital Group's head of research Jasper Lawler said.
"In the supply and demand picture for oil there hasn't been much change ... There is a general theme of selling back things that have recently been outperforming, tech being the obvious one ... so if you are looking across the asset spectrum and looking to sell things that have done well, then oil fits into that category."
Traders said prices fell after an American Petroleum Institute
(API) report on Tuesday that showed a 9.2 million barrel rise in gasoline stocks in the week ended Dec. 1, and an increase of 4.3 million barrels in distillate inventories, which include motor diesel and heating oil.
The perception that the higher fuel stocks pointed to weak demand outweighed a drop in crude inventories by 5.5 million barrels to 451.8 million barrels, traders said.
One factor that could undermine OPEC's and Russia's effort to cut supplies and prop up prices is U.S. oil production <C-OUT-T-EIA>, which has risen by 15 percent since mid-2016 to 9.68 million barrels per day, close to levels of top producers Russia and Saudi Arabia.
But a weaker economic performance and a decline in refinery capacity utilisation in the first quarter could be a drag on oil demand and dampen prices, said Georgi Slavov
, head of research at commodity broker Marex Spectron.
"Demand remains firm, which is the main reason for us to still see oil at/above $60 per barrel. This is likely to change as we approach 2018," Slavov said in a note.
"We are starting to pick up weakness in the macro performance of key oil consuming regions. We are also starting to take note of the forthcoming January–February decline in refinery capacity utilisation," he said.
By Amanda Cooper