Looming over oil markets has been surging United States crude production

But the confident mood in the oil market has been tempered by USA crude production C-OUT-T-EIA, which climbed to a record 10.4 million barrels per day last week, putting US output ahead of Saudi Arabia and closing in on Russia's 11 million bpd.

Brent crude futures were at $69.44 per barrel, down 3 cents from their last close.

Commercial crude oil inventories in the USA fell 2.6 million barrels, or 0.6 percent, to 428.3 million barrels for the week ending March 16, according to the Energy Information Administration data released earlier.

"Fears of a trade tit-for-tat with China is a component to oil's weakness today insofar as it might impact accelerating demand", said Anthony Headrick, energy market analyst and commodity futures broker at CHS Hedging LLC in Inver Grove Heights, Minnesota.

But the confident mood in the oil market has been tempered by USA crude production, which climbed to a record 10.4 million barrels per day last week, putting US output ahead of Saudi Arabia and closing in on Russia's 11 million bpd.

Oil held above $65 a barrel after USA crude inventories unexpectedly dropped, falling below the five-year average in a sign that OPEC-led supply cuts aimed at shrinking a glut are bearing fruit.

Soaring US output, as well as rising output in Canada and Brazil, is undermining efforts by the Middle East dominated oil cartel Opec to curb supply and bolster prices.

Further supporting oil prices has been supply restraint led by the Organization of the Petroleum Exporting Countries (Opec) and Russian Federation, which started in 2017 and is scheduled to go on for the rest of 2018.

US production growth has partly been countered by the deal to cut output by the Organization of the Petroleum Exporting Countries, Russia and their allies. WTI traded between $64.23 a barrel and $65.74 a barrel during the session.

Brent crude futures were at $67.66 per barrel, up 24 cents, or 0.4 percent.

With U.S. oil increasingly making its way into the world, many analysts expect global oil markets to flip from slight undersupply in 2017 and early this year into oversupply later in 2018.

Whether the decline in American inventories can reassure OPEC is uncertain.

In gasoline, the EIA reported a 1.7-million-barrel inventory decline, on top of the 6.3-million-barrel fall reported for the previous week. One of the options is looking at the past seven years of inventories in OECD countries, instead of five years. Still, while stockpiles have declined, U.S. oil production has continued to surge, with output hitting a fresh record last week.

  • Eleanor Harrison