By Georgi Kantchev 

LONDON--Oil prices moved in a narrow range early on Wednesday, with traders bracing for U.S. oil inventory data expected later in the day.

Oil futures have been whipsawing in recent weeks as market participants weigh signs of impending supply cuts and improving demand against signs of continuing global oversupply. A key indication of oversupply in the U.S., official inventory data from the U.S. Energy Information Administration will be watched closely later Wednesday, with analysts expecting another large build up.

Brent crude for April delivery was down $0.27, or 0.5%, at $60.73 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, light, sweet crude futures for delivery in April traded at $50.79 a barrel, up $0.27, or 0.5%. Both oil benchmarks had settled higher on Monday.

Analysts polled by The Wall Street Journal expect inventories to have increased by 4.6 million barrels last week as domestic crude production remains at multi-decade highs. Inventories are already at their highest level for this time of year in at least the last 80 years, the EIA said in its previous report.

Late Tuesday, the American Petroleum Institute said its data showed U.S. crude inventories rose by 2.9 million barrels for the week ended Feb. 27.

The rapid crude inventory buildups pose a major downside risk for the coming weeks and BMI Research expects oil prices to remain low and volatile in the first half of the year.

"Further upward price movement will have to be driven by fundamentals and not sentiment," it said.

News that Libyan oil production has increased despite the fresh fighting added to the fears of continuing global oversupply of crude. Oil output in the country, where two rival governments are locked in a violent conflict, has risen in recent days to around 500,000 barrels a day, up from an average of 325,000 barrels a day in January, the state-run National Oil Co. said.

Meanwhile, Saudi Arabia on Tuesday increased the price differentials for its oil sold to customers in the U.S. and Asia in April. Traders said the monthly price adjustments reflect seasonally stronger refining margins and the recent rally in crude prices.

"The rebound in oil prices came faster than expected and has run most of its course," said Norbert Ruecker, head of commodities research at the Julius Baer banking group. Mr. Ruecker expects production growth in North America to slow in the coming weeks, but he sees prices stabilizing above $60 per barrel over the coming months.

Nymex reformulated gasoline blendstock for April--the benchmark gasoline contract--fell 0.8% to $1.9349 a gallon, while ICE gasoil for March changed hands at $585.50 a metric ton, up $0.25 from Tuesday's settlement.

Write to Georgi Kantchev at georgi.kantchev@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires