Oil prices slipped on Tuesday but kept trading in a tight range, as concerns about rising U.S. crude inventories ahead of data overshadowed OPEC production cuts.
U.S. crude stockpiles have risen for seven straight weeks. Forecasts for another weekly build, this time of 3.1 million barrels last week, fueled worries that demand growth may not be sufficient to soak up the global crude oil glut.
U.S. West Texas Intermediate crude futures settled down 4 cents, or 0.1 percent, at $54.01 a barrel and Brent crude fell 34 cents, or 0.6 percent, to $55.59 a barrel.
For the month, Brent was little changed, and WTI notched a monthly gain just above 2 percent.
U.S. gasoline futures settled down 1.35 percent at $1.5120 a gallon, also weighing down the petroleum complex.
Gasoline was under pressure on the final trading day for the March contract, the final month in which gasoline that complies with environmental standards for winter-grade fuel is offered. Abundant supplies of the fuel, which has different additives from those required in the summer, have weighed on prices.
The Organization of the Petroleum Exporting Countries has so far surprised the market by showing record compliance with oil-output curbs, and could improve in coming months as the biggest laggards - the United Arab Emirates and Iraq - pledge to catch up quickly with their targets.
While the Nov. 30 agreement to reduce production prompted oil prices to rise $10 a barrel, they have been trading in a narrow $3 range in recent weeks.
"Without full compliance by the OPEC cartel and non-OPEC producers, and signs that demand is picking up, we are positioned for a correction," said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut.
"There's a risk that some of the new longs will start to head for the exits, and that's where we could see a correction."
Still, he said, prices are likely to stay locked in their current band unless there are signs that the production cut agreement has failed, or that compliance is dropping.
U.S. stockpiles rose 2.5 million barrels in the week to Feb. 24, according to a report from trade group the American Petroleum Institute. Gasoline stockpiles rose unexpectedly and distillate stockpiles fell more than expected, the API said. Crude declined slightly on the report.
The official report from the U.S. Energy Information Administration is due at 10:30 a.m. EST on Wednesday.
OPEC agreed to curb output by about 1.2 million barrels per day (bpd) from Jan. 1, the first cut in eight years. Underlying the high compliance to the deal, Iraq trimmed exports of Kirkuk crude oil to help meet its output target.
In addition, 11 non-OPEC oil producers have promised to cut output. Russia reduced production by 124,000 barrels per day this month from October levels, Interfax reported, citing a source familiar with the data.
Broadly, analysts and economists expect an average 2017 Brent price of 57.52 a barrel, according to a Reuters poll.
Oil industry and OPEC country sources told Reuters Saudi Arabia wanted crude prices to rise to $60 a barrel this year., hoping that would not spur new U.S. production.
But a report from consultancy Rystad Energy this month said the break-even price for U.S. shale oil producers fell last year to an average $35 per barrel.
The market shrugged off a report Tuesday afternoon that showed U.S. crude production had contracted in December. [EIA/PSM] The market has been looking to the weekly rig count report for a more timely picture of U.S. crude production.
(Additional reporting by Naveen Thukral in Singapore and Sabina Zawadzki in London; Editing by Marguerita Choy and David Gregorio)