NEW YORK: Oil cut short a four-day rally on Wednesday, with investors and traders focusing again on the supply glut in the market after US crude stocks set record highs.

A rebound in the dollar also weighed on crude prices because it makes commodities denominated in that currency more costly.

US crude shaved off more than a quarter of the nearly 20 percent gain it had made since Thursday's close, slumping more than 5 percent, or $2.80 a barrel, to $50.25 by 11:20 a.m. EST (1620 GMT). At one point, it almost broke below $50.

Brent oil lost about 3 percent, or $1.80, to $56.11 after a session low at $55.41.

US crude stocks jumped by 6.3 million barrels last week to 413.06 million, their highest since records began in 1982, the government-run Energy Information Administration reported. Traders and investors had expected a build of just about 3.5 million barrels for the week ended Jan. 30.

Oil's $9 climb since Thursday had raised speculation that the market's seven-month rout might be near an end.

But the EIA data reignited worries about the global oil glut that sparked the selloff, which erased about 60 percent off crude prices between June and January.

"If the market was looking for something to try and extend the four-day rally, it was certainly not" in the EIA data, said Sal Umek, senior associate at the Energy Management Institute in New York.

Since prices fell by 60 percent between June and January, traders have wrestled with whether the dramatic price collapse would be enough to slow fast-growing US shale output or whether oil still had further to fall.

While a sharp drop in the number of US oil rigs and a wave of budget cuts by major energy companies boosted speculation production would fall faster than expected, analysts predict the market will still be oversupplied for the first half of the year.

Too quick a price recovery may also keep expensive shale projects running, traders said.

"Prices are looking for a level to stabilise around for a few weeks or months," said Richard Mallinson, an analyst at Energy Aspects in London.

"It's looking like it could be in the fifties."

Other factors are also influencing the outlook, with the dollar steadying after its worst day in more than a year. The US unit rose against a basket of currencies by 0.2 percent, making dollar-traded commodities more expensive.

The outlook for oil demand has also been muddied by signs the Chinese economy is slowing. On Wednesday data showed China's services sector grew at the slowest pace in six months in January.