Investing.com - Oil prices edged lower in European trading on Wednesday, moving further away from the strongest level in more than three weeks after industry data overnight showed a surprise increase in U.S. oil stockpiles.
The U.S. West Texas Intermediate crude June contract dipped 39 cents, or around 0.8%, to $48.27 a barrel by 3:35AM ET (07:35GMT). The U.S. benchmark shed 19 cents on Tuesday.
It rallied to its highest since April 28 at $49.66 at the start of the week on news that Saudi Arabia and Russia agreed to extend oil output cuts for a further nine months until March 2018.
Elsewhere, Brent oil for July delivery on the ICE Futures Exchange in London declined 27 cents to $51.38 a barrel, after losing 17 cents a day earlier. The global benchmark touched its strongest level since April 21 at $52.63 on Monday.
After markets closed Tuesday, the American Petroleum Institute said that U.S. oil inventories rose by 882,000 barrels in the week ended May 12.
The API report also showed a decline of 1.78 million barrels in gasoline stocks, while distillate stocks rose by 1.79 million barrels.
The U.S. Energy Information Administration will release its official weekly oil supplies report at 10:30AM ET (14:30GMT) Wednesday. There are often sharp divergences between the API estimates and the official figures from EIA.
Analysts expect crude oil inventories dropped by around 2.3 million barrels at the end of last week, while gasoline supplies are seen decreasing by 731,000 barrels and distillates are forecast to fall by about 1.0 million barrels.
Oil rallied at the start of the week after Saudi energy minister Khalid al-Falih and his Russian counterpart Alexander Novak said they had agreed to prolong an existing production cut deal by another nine months until March 2018.
However, the 12 remaining OPEC members and other producers participating in the cuts have to agree to the extension during a meeting on May 25.
In November last year, OPEC and other major global producers, including Russia, agreed to cut output by about 1.8 million barrels per day between January and June, but so far the move has had little impact on inventory levels.
Crude sank to a five-month low earlier this month, rattled by concern over increasing U.S. crude output that has shaken investors' faith in the ability of OPEC to rebalance the market.
The U.S. rig count rose for the 17th week in a row to the highest level since August 2015 last week, implying that further gains in domestic production are ahead.
Elsewhere on Nymex, gasoline futures for June held steady at $1.592 a gallon, while June heating oil slipped 0.8 cents to $1.507 a gallon.
Natural gas futures for June delivery slid 0.9 cents to $3.221 per million British thermal units.