Oil fell below $70 a barrel on Wednesday after a U.S. government report showed a surprise increase in gasoline supplies in the world's top consumer, but a drop in crude stocks limited losses.
Gasoline stocks rose by 3.4 million barrels, the Energy Information Administration said. Analysts expected supplies to fall. That was offset by a big, 3.9 million barrel drop in crude inventories.
There was a larger than expected draw in crude inventories, but the market is headed lower and I think that's a result of product inventories building, especially gasoline, said Amanda Kurzendoerfer, commodities analyst at Summit Energy.
U.S. crude for July lost 71 cents to $69.76 a barrel by 1503 GMT (10:03 a.m. EDT), having earlier fallen as low as $69.00. Brent crude for August slipped 52 cents to $69.72.
Stocks of distillate fuels also climbed according to the EIA report, rising by 300,000 barrels. An increase of 800,000 barrels was expected by analysts.
Earlier, oil fell as European shares slid for a fourth day as some investors unwound trades that had bet on a speedy economic recovery. American Petroleum Institute inventory data late on Tuesday had also pressured prices.
The API reported crude stocks fell 1.3 million barrels and gasoline rose by 2.1 million barrels.
Oil traders consider the EIA report to provide a more complete snapshot of supplies because companies are required to respond to its weekly survey.
The dollar was slightly weaker against a basket of other currencies, adding some support for oil. A weaker dollar can boost investor demand for oil and commodities.
Oil hit a 2009 high above $73 last week, lifted by expectations of economic recovery that would increase fuel demand. Prices are still far below the record high above $147 reached last year.
President Barack Obama will unveil on Wednesday plans for sweeping reform of U.S. financial regulation, aimed at averting future crises such as the banking meltdown that has hit the global economy.
(Additional reporting by Reuters New York Energy desk; Editing by William Hardy)