Oil prices fell marginally on Wednesday as government data showed U.S. crude stocks last week were at the highest level since September 1990.
The Energy Information Administration's weekly inventory report showed a 5.6-million-barrel rise in U.S. crude stocks, to 366.7 million barrels, beating analysts' expectations of a 1.9-million-barrel build.
U.S. crude for May delivery settled down 16 cents at $49.25 a barrel after a day of see-saw trading. ICE Brent crude settled down 17 cents at $51.79.
Another week, another bearish inventory report. It has been negative week after week and yet the market hasn't collapsed, said Tom Bentz, senior commodity analyst at BNP Paribas Commodity Futures Inc in New York.
It's defying fundamental logic, focusing instead on the dollar, the strength in the stock market and inflation fears -- that's what's keeping the oil price up.
The bearish inventory data outweighed a modest rise on the stock market, with the Dow Jones industrial average staying positive on Wednesday.
Oil prices have tumbled nearly $100 per barrel since last July, as the global recession dented oil demand, but they have recovered in recent months from a low of $32.40 in December.
A rally in equity markets this month, in the hope that the world economic outlook might be brightening, has helped boost oil prices, despite its weak supply-demand fundamentals.
We still expect the U.S. stock market to be the intermediate price driver for most commodity complexes over the next few weeks, Edward Meir of MF Global said in a research note.
However, ExxonMobil Corp Chief Executive Rex Tillerson said on Wednesday in an interview with Reuters that high inventory levels will affect oil prices even when the U.S. economy rebounds.
He added that crude oil price should remain range-bound for a while as high inventory levels and concerns about the world economy outweigh attempts by OPEC to curb supply.
OPEC had announced production cuts of up to 4.2 million barrels a day since September in an attempt to stem the slide in oil prices.
The Organization of the Petroleum Exporting Countries said Wednesday that world oil demand would fall by 1.37 million barrels per day in 2009, up from its previous forecast for a fall of 1.01 million bpd.
In the coming months, the market is expected to remain under pressure from uncertainties in the economic outlook, demand deterioration and the substantial supply overhang, OPEC said.
Both the International Energy Agency and the U.S. government agency EIA have also just reduced their global demand forecasts.
In its monthly outlook released on Tuesday, the EIA cut its 2009 world oil demand forecast by 180,000 barrels per day to just over 84 million bpd.
Gloomy economic indicators remained on Wednesday, with Federal Reserve Data showing U.S. industrial output shrank more than expected in March.
(Additional reporting by Robert Gibbons and Gene Ramos in New York and Jane Merriman in London; Editing by Christian Wiessner)