LONDON -- Oil gave up some of its gains on Wednesday after a larger-than-expected rise in crude oil and gasoline stocks last week in top energy consumer the United States.
Prices had reached two-week highs earlier, supported by expectations of another cut in US interest rates to revive US economic growth.
The view that OPEC will leave production levels unchanged when it meets in Vienna later this week also underpinned the market as well as a report of production disruption at a major Canadian oil sands facility.
US crude rose 10 cents to $91.74 a barrel by 1634 GMT. London Brent crude was down 5 cents at $91.95 a barrel.
"The EIA report was bearish, particularly with the build in gasoline as it is a sign that consumers are cutting down on purchases," said Phil Flynn, analyst at Alaron Trading. "That is a sign that consumers are feeling the pain of a slowing economy."
US crude oil stocks rose by 3.6 million barrels last week, said the US Energy Information Administration.
This was more than an increase of 2.4 million barrels that analysts had predicted.
Gasoline stocks were up by 3.6 million barrels, more than the 1.9 million barrel increase analysts had forecast. Distillate stocks fell by 1.5 million barrels, which compared with forecasts for a drop of 1.7 million.
The US Federal Reserve is expected to cut interest rates on Wednesday for the second time in just over a week to help the US economy cope with a housing slump and credit troubles in global financial markets.
US gross domestic product grew at a weaker-than-expected 0.6 percent annual rate in the fourth quarter and for 2007 as a whole was up just 2.2 percent, the slowest growth in the country's annual GDP since 2002.
"Once the Fed decision is out of the way, most financial and commodity markets could again come under pressure," said Edward Meir, analyst at broker MF Global in a research report, citing uncertainty over the health of the US economy.
Oil hit a record of $100.09 a barrel on Jan. 3 partly on the back of long-term supply concerns, but has dropped back since then as fears of a US slowdown have intensified.
Goldman Sachs remains positive on oil's fundamental supply/demand picture despite concerns over the US economy.
"While concerns over economic growth will likely continue to create volatile swings in speculative positions and crude oil prices in the near term, current oil market fundamentals remain robust and continue to support our $95 a barrel average 2008 price forecast," the bank said in a research note.
But flows of speculative money into oil have been declining in the past two weeks towards low levels seen last summer during a sell-off resulting from the turmoil in the US credit markets, Goldman said.
The Organization of the Petroleum Exporting Countries is expected to leave production levels unchanged when it meets this week in Vienna, despite calls from the US and other consumers for the group to open the taps to bring down prices.
OPEC does not need to change its output when it meets on Friday, the head of Libya's OPEC delegation Shokri Ghanem told Reuters.
US Energy Secretary Sam Bodman has reiterated calls for OPEC to increase output to help rebuild global inventories.
