Oil eased below $ 112 per barrel yesterday on increasing supply and rising inventories in the US.

Brent futures shed 67 cents to $111.27 per barrel at 1556 GMT, after adding 54 cents on Tuesday. US crude was trading down 37 cents at $ 92.78 per barrel.

A weekly US Energy Information Administration report said crude inventories rose 1.3 million barrels last week, slightly below expectations for a build of 1.5 million. Gasoline stocks rose by 7.4 million barrels.

"The report is solidly bearish with the large builds in refined products, especially gasoline," John Kilduff of Again Capital LLC in New York told Reuters.

The EIA had said earlier that US crude oil production will rise by the largest amount on record in 2013, and is set to soar by a quarter over two years.

The rapid increase underscores how improvements in horizontal drilling and hydraulic fracturing technology have transformed the energy market in the last five years, allowing producers to tap shale oil from tight rock formations.

Olivier Jakob, analyst at Petromatrix in Zug, Switzerland told Reuters that the increased supply of oil from the US could force other producers to cut supply if they want to maintain prices above $ 100 per barrel.

The EIA said in the forecast that the rise in US output would contribute to a well supplied market over the next two years. The agency said that international Brent crude oil prices would fall slightly in 2013 to around $ 105 a barrel on average from just under $ 112 last year, before falling to $ 99 a barrel in 2014.

US benchmark West Texas Intermediate is seen averaging $ 89 a barrel in 2013 and $ 91 a barrel in 2014.