By Timothy Puko, Sarah McFarlane and Jenny W. Hsu

Oil prices ticked down late Thursday morning after data showing an unexpected rise in U.S. crude stockpiles and declines in refined-fuel stockpiles sent mixed signals about the oil market.

The U.S. Energy Information Administration said Thursday that crude stockpiles grew 614,000 barrels. That briefly helped crude prices recover from losses tied to estimates from the American Petroleum Institute, an industry group, showing stockpiles grew by much more, 4.2 million barrels, in the week ended Friday.

But even the small addition to already-heavy stockpiles has also kept weighing on prices. Analysts surveyed by The Wall Street Journal had forecast a 1.4-million-barrel decline in crude supplies.

Light, sweet crude for February delivery recently fell 20 cents, or 0.4%, to $53.86 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 3 cents, or 0.1%, to $56.19 a barrel on ICE Futures Europe. Brent's front-month February contract expires at settlement. The more-actively-traded March contract recently fell 6 cents, or 0.1%, to $56.90 a barrel

"It's not negative enough, it's not enough of a surprise to really hurt this market," said Donald Morton, senior vice president at Herbert J. Sims & Co., who runs an energy-trading desk. "With all the anticipation of what's coming after the new year, (traders) want to buy the dip."

Oil prices have been on the rise lately because of output cuts agreed to by the Organization of the Petroleum Exporting Countries and rival producers around the world. They agreed last month to cut output by nearly 1.8 million barrels a day in total, more than 1% of global supply. Many traders expect those cuts to start in January and help historically high inventories start to shrink in the weeks or months that follow.

That rally, however, has stalled out since late in Tuesday's trading. And prices have largely stayed at small losses since the API's estimates late Wednesday.

"The crude complex saw this week's bullish momentum grind to a halt," Robbie Fraser, commodity analyst at consultant Schneider Electric SA in Louisville, Ky., said in a note.

EIA also said gasoline stockpiles fell by 1.6 million barrels, compared with analysts' expectations of a 400,000-barrel addition. API had estimated a 2.8-million-barrel fall in gasoline stocks

Distillates in storage, including heating oil and diesel, declined by 1.9 million barrels, compared with expectations for a 300,000 addition.

Gasoline futures recently lost 0.2% to $1.6705 a gallon and diesel futures gained 0.5% to $1.7070 a gallon. Both are outperforming U.S. crude, even with gasoline's losses.

That is likely to help North American refiners at a time of year that is often weak for them, Mr. Morton and others said. The higher margins could make profits easier to come by for a sector that just unexpectedly cut its utilization by 0.5 percentage points to 91% of capacity last week.

"The bottom line is gasoline demand has remained strong throughout all of 2016, (fuel) inventories have been declining in recent weeks and exports remain good and that's certainly good for refiners," said Andy Lipow, president of Lipow Oil Associates in Houston.

Declines in gasoline and distillate stockpiles likely came from a 604,000-barrels-a-day drop in refinery runs at a time of year when refineries usually run harder, said Tim Evans, a Citi Futures analyst. However, it isn't likely enough to cause a major retreat in oil prices, he added.

"We continue to see a few reports of OPEC members reiterating their commitment to reducing production for 2017," he wrote in a note to clients. "These stories help keep the market focused on the production cuts and related expectations that the market will rebalance," sending prices higher despite other factors.

The boom of U.S. unconventional oil production has been a major threat to OPEC, which supplies one-third of the global oil supply. For over two years, the cartel ramped up their production in a bid to protect their market shares and weed out some of their less-competitive U.S. rivals.

But analysts have said the tactic was largely unsuccessful. The increase in supplies quickly outpaced demand growth and earlier this year prices sunk to as low as $26 a barrel, leading to a number of OPEC producers suffering from tighter national budgets because of weaker oil revenues. Meanwhile, production in the U.S. abated by less than expected. Last month, OPEC abandoned that strategy and agreed to cut their productions to jump-start prices, causing oil to rally above $50 a barrel to more than one-year highs.

But that rally could hit a limit, according to many analysts. The higher prices could simply encourage more output from other producers around the world, especially the unconventional drillers working shale fields in the U.S.

"Based on an improved crude price outlook, shale gas and oil drilling will pick up again," said consultancy JBC Energy in a research note.

Sarah McFarlane and Jenny W. Hsu contributed to this article.

Write to Timothy Puko at tim.puko@wsj.com, Sarah McFarlane at sarah.mcfarlane@wsj.com and Jenny W. Hsu at jenny.hsu@wsj.com

(END) Dow Jones Newswires

December 29, 2016 12:27 ET (17:27 GMT)

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