OPEC, and some non-OPEC countries led by Russian Federation, had agreed to remove 1.2 million barrels of crude oil per day from the market starting January 1 to help crude prices increase. "Because the number was a little disappointing, it played into the slowing demand scenario", said Phil Flynn, oil analyst at Price Futures Group in Chicago.
Though the United States published robust jobs data last week, global markets remain nervous after China reported the lowest annual economic growth in almost 30 years in January.
"It would seem that the market is really not too anxious yet about the potential loss of Venezuelan barrels", said analysts at JBC Energy in a report.
The oil price also came under pressure as weekly data published by the U.S. Energy Information Administration on Wednesday showed an unwelcome increase in stocks of crude oil. "That said, if the other OPEC countries fail to offset this outage, the oil market could quickly become undersupplied, driving the price up".
As of 7:35 a.m. EST, West Texas Intermediate front-month crude future prices fell 0.9 percent to $53.53 per barrel, while Brent future prices fell 0.5 percent to $62.36 per barrel as of the same time.
Lower OPEC output and hopes of some progress over the US-China trade dispute have helped Brent prices recover to around US$60 per bbl, although the outlook on oil demand remains subdued.
Still, some analysts were relieved that U.S. crude oil inventories only rose by 1.3 million barrels in the week to February 1, according to the EIA, compared with expectations for an increase of 2.2 million barrels. USA crude output stayed at a record-high 11.9 million barrels a day.
"The fact that USA crude oil and gasoline stocks rose more sharply than expected, as reported by the API after close of trading yesterday, is weighing on prices", said Carsten Fritsch, analyst at Commerzbank. Distillate stockpiles alone fell by 2.26 million barrels, compared with a decline of 2 million barrels forecast in a Bloomberg survey. They closed down 1.7 percent on Tuesday.
The European Union is considering imposing more sanctions on the government of Venezuelan President Nicolas Maduro but has not discussed an oil embargo, Malta's foreign minister said on Monday. Both lines carry Canadian crude to the U.S.
U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will lead a delegation to Beijing next week to lay the groundwork for a meeting between Presidents Donald Trump and Xi Jinping later this month.