On the New York Mercantile Exchange, light, sweet crude futures for delivery in April traded at $33.96 a barrel at 0207 GMT, down $0.44 in the Globex electronic session. May Brent crude on London's ICE Futures exchange fell $0.17 to $ 36.64 a barrel.

U.S. oil production has tapered gradually from a peak in April 2015, but the rate of decline has yet to materialize in a significant price recovery, as many shale producers remain resilient despite falling revenue.

As of last week, total U.S. crude inventories stood at 507.6 million barrels, a fresh weekly high. Historical monthly data shows inventories last surpassed 500 million barrels in 1930. The official data will be released by the U.S. Department of Energy later Wednesday.

"We'd also not assume that a smaller Department of Energy draw would receive bullish reception since any increase at all sets a new record," said Tim Evans, a Citi Futures analyst.

Oil prices surged overnight to a two-month high on the rising possibility of a production freeze after Russia's energy minister said a "critical mass" of oil-producing countries--which together produce around 73% of the world's oil- -had agreed to hold output at January levels, state news agency TASS reported.

The pact, however, was conditional on the participation of other oil producers. Iran has reiterated that it won't join and will continue to pump until production returns to about 4 million barrels a day.

Russia and Venezuela said last week they were planning a broad meeting of producers in mid-March to expand the agreement to freeze production.

In an interview Monday with CNBC, Nigeria's oil minister, Emmanuel Ibe Kachikwu, said the chances of a successful production freeze agreement are "very high."

Most market observers, however, say capping production at January levels won't result in any immediate impact on the glut because many producers were producing at a high level. Russia's January output reached record high of 10.88 million barrels.

"The fact they have all come together is a step in the right direction," said Virendra Chandra, an Energy Aspects analyst.

Nymex reformulated gasoline blendstock for April--the benchmark gasoline contract--fell 17 points to $1.3018 a gallon, while April diesel traded at $1.0950, 45 points lower.

ICE gasoil for March changed hands at $322.75 a metric ton, down $0.25 from Tuesday's settlement.