Despite the price drop, the extension of the OPEC and allies' production cut deal through the end of 2018 continues to sent a stronger signal that the oil market rebalancing could speed up and send WTI oil prices to average $54.78 a barrel in 2018, up from a previous projection of $52.50, a Reuters poll of 30 analysts and economists showed on Wednesday.
U.S. gasoline stockpiles built sharply during the latest reference week, resulting in a sharp drop in crude oil inventories. So far companies have chosen to hedge at the higher prices rather than drill as they try to return to positive cash flow. The cartel's output dropped last month to the lowest in half a year.
West Texas Intermediate for January delivery was at $56.88/bbl on the New York Mercantile Exchange, down 74 cents, at 1:31 p.m. London time.
Recent spurt in oil prices is triggering a response from the suppliers. Crude prices have risen more than 20% since September.
The United States Oil ETF (NYSEARCA: USO) traded down about 1.5%, at $11.37 in a 52-week range of $8.65 to $12.00.
Oil slid toward $57 a barrel after industry data showed US gasoline stockpiles expanded for the first time in four weeks.
"Attention will no doubt be focused not only on inventories but also on US crude oil production", according to analysts at Commerzbank.
The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning, showing that U.S. commercial crude inventories decreased by 5.6 million barrels last week, maintaining a total U.S. commercial crude inventory of 448.1 million barrels. ICE gasoil, a benchmark for diesel fuel, changed hands at $554.75 a metric ton, down 0.31% from the previous settlement.