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Despite the slide, investors expect US sanctions on Venezuela and production cuts led by OPEC to head off a glut this year, buoying prices.

West Texas Intermediate crude oil for March delivery US:CLG9 fell 90 cents, or 1.7%, to settle at $53.66 a barrel on the New York Mercantile Exchange after trading as high as $55.21.

Also weighing on crude prices, the American Petroleum Institute said U.S. crude oil supplies rose by more than 2.5M barrels during last week, adding to the previous build.

However, Russian oil output in January missed the target for the output cuts, Energy Ministry data showed on Saturday.

Prices have been buoyed by a new round of supply cuts from the Organization of the Petroleum Exporting Countries and its allies that began in January.

Gasoline stocks increased by 513,000 barrels, less than anticipated, while distillate stockpiles posted a larger-than-expected drop by 2.3 million barrels.

The producers known as OPEC+ started cutting production by 1.2 million barrels per day (bpd) from last month to avert a new supply glut, and OPEC has delivered nearly three-quarters of its pledged cuts already, a Reuters survey showed last week.

United Kingdom trade secretary says European Union 'irresponsible' to refuse to reopen #Brexit deal
May said she is seeking changes to the backstop, rather than its removal from the agreement, as some pro-Brexit British MPs want. In her speech May said her commitment to avoiding a hard border between Ireland and Northern Ireland was "unshakeable".

Analysts said USA sanctions on Venezuela had focused market attention on tighter global supplies.

Despite hitting a 2-month high last week, crude oil prices have been chopping inside a tight range for several days as investors try to determine the key catalyst in the market at this time.

Meanwhile, Juan Guaidó, the Venezuelan opposition leader recognized as the country's interim president by the US and several major European countries, has ordered Venezuela's congress to appoint new boards at PDVSA and its USA refining unit Citgo, Reuters reports.

Oil prices fell on Tuesday, a day after data showing a decline in USA factory orders dragged both benchmarks down from 2019 highs.

Venezuela, like fellow OPEC members Iran and Libya, was exempt from production curbs under the OPEC+ deal on expectations that its output faced involuntary downward pressure in 2019.

"The global oil supply/demand balance could shift from a current significant surplus to zero at the end of the year", Pictet Wealth Management analyst Jean-Pierre Durante wrote in a report. Oil fell on Tuesday after a survey showed euro zone business expansion almost stalled in January. Senior U.S. and Chinese officials are poised to start another round of talks next week.

With a nervous market, traders are focused on the US State of the Union address by President Donald Trump.