Oil edged higher on Wednesday as investors balanced concern over the health of the U.S. economy against the prospect of declining fuel stocks in the world's top consumer.

U.S. crude rose 22 cents to $71.95 a barrel by 1116 GMT (7:16 a.m. EDT) while London Brent was up 21 cents at $70.76.

The deepening crisis in U.S. subprime mortgages -- loans made to high-risk borrowers -- has rattled financial markets and knocked U.S. consumer confidence to its lowest level in nearly two years.

Oil has held up comparatively well, but the U.S. benchmark has fallen from an all-time high of $78.77 on August 1 as some investors worry that a global credit crunch will take its toll on the wider economy and erode oil demand.

On the one hand, developments in the broader financial environment remain in the limelight ..., said a Barclays Capital report.

On the other hand, however, fundamental dynamics remain constructive and prices are finding a solid footing in the face of aggressive short selling by speculative investors.

Some analysts say oil supply will struggle to keep pace with demand this winter unless the Organization of the Petroleum Exporting Countries turns up the taps.

Evidence to support their case may arrive later on Wednesday. U.S. oil inventory data are expected to show a 1.7 million barrel drop in gasoline stocks and an 800,000 barrel decline in crude inventories in the week to August 24.

OPEC officials have steadfastly insisted the world market is amply supplied with crude and that refinery bottlenecks are mostly to blame for tightness in transport fuels.

The group's Secretary-General, Abdullah al-Badri, repeated that message on Tuesday, suggesting the 12-member exporter group would hold output steady when it meets on September 11 in Vienna.

But Badri said the U.S. subprime mortgage meltdown has made it tougher for OPEC to chart oil policy by clouding the picture on demand growth.

The situation in the past couple of weeks has become a lot more serious, he told Reuters on Tuesday.

(Additional reporting by Luke Pachymuthu in Singapore)