U.S. crude inventories fell 2.6 million barrels to 327.7 million barrels last week, according to the Energy Information Administration. They're still 5.6 percent above year-ago levels, though, and above the upper end of the average range for this time of year.
Light sweet crude for October delivery on the New York Mercantile Exchange gained 27 cents to $64.03 a barrel in morning trading. The contract had settled at $63.76, down $1.85, on Tuesday _ the lowest front-month closing price since March 22.
Nymex crude has ended lower on every trading day so far this month.
The drop in crude stocks was larger than expected, but the increase in distillate fuels _ which include heating oil, a key commodity as the winter approaches _ was bigger than most analysts had forecast.
Distillate inventories climbed 4.7 million barrels to 144.6 million barrels. That's 5.8 percent above last year, thanks to increased production to nearly 4.5 million barrels a day, which is the second-highest weekly average ever, the EIA said. Just a couple of weeks ago, distillate inventories were below year-ago levels.
According to a Dow Jones Newswires survey of analysts, U.S. crude oil inventories were expected to fall 1.5 million barrels, while distillates stocks were expected to gain 1.6 million barrels.
Meanwhile, gasoline inventories rose 100,000 barrels to 207.0 million barrels _ 6.4 percent above last year, the EIA said.
Motor gasoline, distillate fuel and jet fuel demand remained strong, staying above year-ago levels, the EIA said.
Heating oil prices fell more than a cent to $1.7525 a gallon, while unleaded gasoline rose nearly 2 cents to $1.1570 a gallon. Natural gas futures fell about 10 cents to $5.465 per 1,000 cubic feet,
Oil prices fell 3 percent on Tuesday after the Paris-based International Energy Agency lowered its expectations of global oil demand growth for this year and next, citing economic weakness in Europe and parts of Asia.
Crude prices reached an intraday record of $78.40 in July but have fallen on an ease in global demand and in supply threats. Although geopolitical tensions appeared to be on the backburner for the moment, some market participants kept a close eye on developments in Nigeria and the Middle East.
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