Light sweet crude for December delivery on the New York Mercantile Exchange fell 41 cents to $58.30 a barrel in electronic trading by midday in Europe. December Brent crude futures on London's ICE Futures exchange dropped 32 cents to $58.66 a barrel.
The focus now is on the market's resilience at current prices and whether key support levels will be broken.
"For technicians, the trading range battle lines are being drawn and it seems that the $57 a barrel area is very critical," said Phil Flynn at Alaron Trading Corp. in Chicago in a report.
According to the U.S. Energy Information Administration's weekly report Wednesday, U.S. crude oil inventories rose by 2 million barrels to 334.3 million barrels in the last week.
That was largely due to crude imports bouncing back up by 599,000 barrels per day from the previous week, when imports dropped off significantly.
Inventories of distillates, which include heating oil and diesel fuel, fell by 2.7 million barrels to 141.3 million barrels. Gasoline inventories fell by 2.8 million barrels to 204.6 million barrels. Furthermore, the EIA said demand for these products has recently accelerated.
The drops in product inventories were larger than anticipated, but the market wasn't too rattled, given that the report indicated that refiners are boosting production and fuel demand is still going strong.
"U.S. inventory figures initially appeared to be bullish due to higher-than-expected draws of distillates and gasoline, but eventually higher refinery runs stopped the uptrend," said Vienna's PVM Oil Associates. "The latest supply news are also mixed with lower output figures coming from Russia but higher export number from Brazil."
Heating oil futures fell half a cent to $1.6460 a gallon, while unleaded gasoline edged higher to $1.4645 a gallon. Natural gas futures dropped 5 cents to $7.660 per 1,000 cubic feet.
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