Oil slipped below $72 a barrel on Thursday, reversing earlier gains, as large increases in U.S. fuel inventories overshadowed a drop in crude inventories and outlooks for a rise in global demand.
U.S. crude fell 9 cents to $71.22 a barrel by 1533 GMT (11:33 a.m. EDT), having risen to $72.44. London Brent crude fell 38 cents to $69.45.
Data from the U.S. Energy Information Administration (EIA) showed crude oil inventories in the United States fell a larger than expected 5.9 million barrels.
But inventories of gasoline and middle distillates, including diesel and heating oil, rose although analysts forecast a fall for gasoline and a smaller increase in middle distillates.
Do we really care if crude stocks are down when product stocks are way up? Because that's what people really use -- gasoline and heating oil. The product increase will definitely be a damper on the energy markets today, Mike Zarembski, senior commodities analyst with Optionxpress in Chicago.
The market looks like it may be ready for a breather, maybe some consolidation after nothing new out of OPEC this week. We have these high oil prices for very little reason other than a weaker dollar and money flowing into commodities.
Earlier on Thursday, the International Energy Agency (IEA) said global oil demand will be almost half a million barrels per day higher than previously forecast this year and next on stronger-than-expected U.S. and Asian fuel consumption.
The year-on-year decline will diminish as we go through the end of 2009, and then from early 2010, we will begin to see year-on-year growth in global demand, said David Fyfe, head of the IEA's oil industry and market division.
As widely expected, at a meeting that ended early on Thursday, the Organization of the Petroleum Exporting Countries saw no need to change output formally, although some members called for stricter compliance on existing curbs.
Ali al-Naimi, the oil minister of Saudi Arabia, said oil prices were being driven by economic recovery.
The lack of more aggressive action reflected a belief that demand will be sufficient in pulling down the overhang in the market, David Kirsch, director of market intelligence services at PFC Energy in Washington, said.
(Additional reporting by Nick Trevethan in Singapore; editing by Keiron Henderson)