U.S. crude stocks up 1.3 mln bbls vs 3.5 mln draw forecast-EIA.
Oil fell on Thursday after U.S. government data showed an unexpected build in crude oil stockpiles.
U.S. crude futures fell $1.20 to settle at $72.94 a barrel, retreating from Tuesday's 3-1/2-year high of over $75.
Brent crude futures lost 85 cents to settle at $77.39 a barrel.
U.S. crude stockpiles rose 1.3 million barrels last week, according to U.S. Energy Information Administration data. Analysts had expected a 3.5 million-barrel decline.
"An unexpected build in the U.S. commercial crude inventory has prompted profit-taking," said Abhishek Kumar
, senior energy analyst at Interfax Energy in London.
Inventories at Cushing, Oklahoma, the delivery point for U.S. crude futures, fell to their lowest since December 2014.
"The most concerning aspect for inventories is the continued decline in Cushing," said Andrew Lipow, president of Lipow Oil Associates.
Flows into Cushing dropped following an outage at the 360,000 barrel per day (bpd) Syncrude facility in Alberta
. The facility is expected to remain offline through July, so Cushing inventories are likely to keep declining, said Lipow.
On Wednesday, U.S. President Donald Trump accused the Organization of the Petroleum Exporting Countries of driving up fuel prices.
"The OPEC Monopoly must remember that gas prices are up & they are doing little to help," Trump tweeted. "If anything, they are driving prices higher as the United States defends many of their members for very little $'s."
"This must be a two way street," he wrote, adding in block capitals, "Reduce pricing now!"
OPEC together with a group of non-OPEC producers led by Russia started withholding output in 2017 to prop up the market.
Last month, the group agreed to lift production by about 1 million bpd to offset losses from Venezuela and Iran.
Saudi Arabia on Thursday cut August prices of its Arab Light grade crude exports. The move appeared related to President Trump's tweets, said Stewart Glickman, energy equity analyst at CFRA Research in New York.
Washington's plans to reimpose sanctions against Iran, OPEC's No. 3 producer, have boosted oil prices, analysts said.
On Wednesday, an Iranian Revolutionary Guards commander said Tehran might block oil shipments through the Strait of Hormuz.
"Roughly 30 percent of all seaborne oil is transported through this strait every day," Commerzbank said in a note, adding a blockade would have "dramatic consequences for global oil supply and an impact on prices that is almost impossible to put into figures."
The U.S. Navy stands ready to ensure freedom of navigation and free flow of commerce, a spokesman for the U.S. military's Central Command said.
By Ayenat Mersie