Some traders and investors cautioned that crude futures, which slipped into bear market territory in early August after falling 20 per cent from this year's highs in June, were looking overbought.

Saudi Arabia's oil shipments, as tracked by Thomson Reuters Supply Chain and Commodities Research, are likely to be around 33.22 million tonnes in August, equivalent to about 7.82 million barrels per day (bpd). That sent prices higher Wednesday and is continuing to feed the rally, analysts said.

Oil prices recovered slightly from earlier losses on Wednesday after data showed a decline in weekly USA crude inventories.

September West Texas Intermediate crude was trading 15 cents, or 0.3%, lower at $46.43 a barrel on the New York Mercantile Exchange.

Crude oil prices fell in early Asia trade Wednesday, as optimism that major producers would agree to a production freeze agreement ebbed after Iran signalled it has little interest in such a deal.

Prices hit five-week highs this week, supported by hopes that a Russian-Saudi cooperation may reach a pact to freeze output, easing the stubborn supply glut dogging the market since late previous year.

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Many oil industry analysts have anxious the glut of crude was being replaced by a glut of gasoline, as refiners cranked out supplies faster than USA drivers could use it.

Oil markets were closer to balancing in the second half of 2016, as oil demand was significantly stronger than expected, while unforeseen supply disruptions occurred.

The report also showed that total domestic production rose by 152,000 barrels a day to 8.597 million barrels a day, with output in the lower 48 states climbing 100,000 barrels a day to 8.120 million barrels a day. Higher output would also give the Saudis a few more bargaining chips at the September meeting, according to Reuters' sources.

Saudi Arabia produced 10.55m barrels of oil per day (bpd) in June, and increased output to a record 10.67m bpd in July.

Russian Federation and Saudi Arabia are the world's two largest oil producers.

Analysts however, said gains were being eroded by media reports that Saudi Arabia, OPEC´s top producer, is ramping up production to fresh record levels in August. Refineries processed 2.49 million barrels a day compared with 2.14 million barrels a day a year ago. Steadily rising demand will "help pave the way to a sustained tightening of the crude oil balance", the IEA said in a report last week.