Oil fluctuated around $61 a barrel on Thursday as concerns about the strength of global fuel demand were offset by strong economic growth in China and better-than-expected U.S. banking results.
U.S. crude oil for August delivery was down 71 cents to $60.83 a barrel by 1414 GMT (10:14 a.m. EDT), having earlier hit a low of $60.29 a barrel. On Wednesday, prices had rebounded by almost $2, recovering some of the losses which have seen prices decline by about 15 percent since the end of June.
London Brent crude slipped 49 cents to $62.60 ahead of the August contract's expiry later on Thursday.
Mike Fitzpatrick, vice president at MF Global in New York said the market was trying to decide how high oil prices can rise given the still fragile economy.
$60 is the fulcrum balancing the price lever that tips whenever one contention or another is bolstered by news or economic data, Fitzpatrick said.
China, the world's second largest energy consumer, saw surprisingly strong growth of 7.9 percent in the second quarter, fueled by state spending and bank lending, making it the best-performing major economy in the world.
But doubts about the pace of recovery in other major energy consuming economies has kept a lid on prices, with investors turning cautious as every piece of encouraging economic news appears to be offset by signs there is still a long way to go.
The global slowdown has cut world oil demand by as much as 2.5 million barrels per day, according to the International Energy Agency.
New jobless claims in the United States, the world's largest energy consumer, fell to their lowest level since January on Thursday, but the Labor Department was keen to emphasize an unusual pattern in automotive layoffs had amplified the drop.
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Also highlighting the ongoing problems facing the world economy is the looming bankruptcy of CIT Group Inc
Oil's large gains on Wednesday came after the U.S. Energy Information Administration (EIA) said commercial crude oil stocks fell 2.8 million barrels last week, against market expectations of a 1.6 million barrel fall.
The fall in crude stocks overshadowed a larger-than-expected rise in U.S. gasoline supplies over the Fourth of July Independence Day holiday weekend -- the traditional peak of the U.S. summer driving season.
Analysts said demand was expected to pick-up, but uncommonly high levels of fuel stocks were likely to continue to pressure prices.
(Additional reporting by Fayen Wong in Perth; Editing by Jon Boyle)