Market intelligence firm Genscape reported that stockpiles at the Cushing, Oklahoma delivery point alone rose by over 1.5 million barrels in the week to 22 April, traders said.

Analysts at Morgan Stanley attributed oil's recent gains to macro and commodity funds activity, index- and exchange-traded fund flows and buying from investors fearful of missing out, even as fundamentals remained bearish and looked set to worsen as prices moved higher.

Barclays, in an oil sector report, said it was "not yet convinced that prices will remain here or go even higher".

US crude settled down $1.09, or 2.5%, at $42.64 a barrel. Last week, it hit a five-month high of $44.49.

Brent closed down 63 cents, or 1.4%, at $44.48. It hit a mid-November high of $46.18 last week.

Trading was initially choppy, with prices building on gains over the past three weeks before sliding on the Genscape report. The dollar's slide after a three-day gain also limited oil's downside in early trade as commodities denominated in the greenback became attractive to users of the euro and other currencies.

Oil traded above $100 a barrel in mid-2014 before hitting 12-year lows under $30 earlier this year on glut worries. But since the end of February, crude prices have risen about 30%, responding to tighter US production and Opec plans for an output freeze, which has, however, not materialised.

Some analysts say the rally could come to a crashing halt as production of oil products, especially in Asia, remains rampant and several major gasoline importing countries begin exporting.

"Still-elevated inventory levels, the return of some disrupted supply, further boosts to Saudi and Iranian supply, and increased non-OECD product exports all have the potential to move prices lower over the next several months, especially if broader macro sentiment shifts," analysts at Barclays wrote.

Market data shows the amount of open positions betting on rising US crude prices rose to June 2015 highs last week. Bets taken out in expectation of falling prices fell close to 2016 lows.

While non-fundamental rallies can last several months, "a macro unwind could cause severe selling given positioning and the nature of the players in this rally", Morgan Stanley's analysts said.