Oil was slightly lower on Wednesday, with Brent crude stalled just under $113 a barrel, as concern about weak gasoline demand ahead of the U.S. driving season and a rebounding U.S. dollar weighed on prices.

U.S. crude oil inventories have fallen less than expected, renewing fears high prices are cutting into gasoline consumption in the country, where the start of the driving season will be officially marked by Memorial Day this weekend.

The American Petroleum Institute (API) said on Tuesday crude inventories fell 860,000 barrels for the week ended May 20, lagging expectations of a 1.3 million-barrel draw.

Gasoline stocks also hinted at weakening demand, rising 2.4 million barrels, after analysts had forecast a 300,000-barrel build.

The API stats yesterday appear to show weakness in gasoline demand and it seems the support from gasoline could disappear reflecting the impact of high demand on prices, said Christophe Barret, oil analyst at Credit Agricole Corporate and Investment Bank.

Falling consumption would prompt a correction in oil prices and forecasts that Brent will drop to $85 a barrel by the second half of the year, he said.

Brent crude for July was down 3 cents at $112.50 a barrel at 1240 GMT, up from as low as $111.14 a barrel earlier in the session. U.S. crude was down 59 cents at $99 a barrel, up from a low of $98.26.

Worries about demand were accentuated by a larger than expected drop in new orders for long-lasting U.S. manufactured goods in April, which recorded their largest decline in six months a government report showed on Wednesday.

The U.S. dollar was up 0.17 percent against a basket of currencies, also weighing on oil prices.

Data from the U.S. Energy Information Administration (EIA) is due at 1430 GMT and has supported markets of late, showing 11 successive weekly motor fuel draws.

RESISTANCE

Sharp upward revisions of oil price forecasts by Wall Street giants Goldman Sachs and Morgan Stanley have deepened the schism between oil bears and bulls to levels unseen since oil prices peaked in 2008, a Reuters monthly poll showed.

While bears cited weak demand and ebbing geopolitical risk premiums as reasons for oil to plunge to $75 per barrel, bulls saw it soaring to $140 due to supply shortages and the limited ability of OPEC to cushion any new disruption.

But bullish comments from the oil trading community have not so far this week shielded the market from pressure exerted by a stronger dollar and signs of demand weakness.

Despite all the TVs and the financial websites running the large 'Goldman sees oil at 130 $/bbl' banner the whole day, WTI did not manage to break the resistance of 100 $/bbl, said Oliver Jakob, an analyst at Petromatrix, in a note.

On Wednesday Glencore International Chief Executive Ivan Glasenberg joined the chorus saying commodities fundamentals remain strong as buoyant demand from emerging markets strains tightening supplies.

South African President Jacob Zuma plans to visit Tripoli next week to discuss an exit strategy for Libyan leader Muammar Gaddafi in cooperation with the Turkish government.

Intensifying NATO airstrikes on Tripoli have helped keep a floor on oil prices.

U.S. regulators launched one of the biggest ever crackdowns on oil price manipulation on Tuesday, suing two well-known traders and two trading firms owned by Norwegian billionaire John Fredriksen for allegedly making $50 million by squeezing markets in 2008.

(Additional reporting by Francis Kan; editing by Anthony Barker)