Oil prices slip

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Oil prices fell back overnight, as investors shifted focus to risk aversion, with US crude stockpiles brimming, despite a surprise government report of a supply drawdown last week

US crude futures shot up to a three-week high on the government report, but gains were eroded as traders took a broader look at the the latest data.

The fallback developed as most major commodities also dropped on stop-loss selling, after hitting recent highs, traders said.

Oil drew support earlier in the session from reports showing US claims for unemployment benefits fell more than expected last week to a two-month low, while the trade deficit narrowed sharply in July.

By 1:45pm EDT (5.45am NZT), crude for October delivery was down 55 cents at US$74.12 a barrel, after hitting an session high of US$75.96, the highest since Aug. 18.

ICE October Brent crude fell 83 cents to US$77.34.

US crude stockpiles fell 1.9 million barrels last week, the Energy Information Administration said, much less than the 7.3 million drop shown in industry data on Wednesday and against forecast for a 900,000-barrel increase.

The data also showed small declines in distillate and gasoline stocks and a dip in supplies stored at the Cushing, Oklahoma delivery hub in the week to Sept. 3.

Separately, data from industry data provider Genscape showed that oil inventories at the hub fell by 330,495 barrels to 37.6 million barrels in the week to Sept. 7. But overall, total US commercial stockpiles rose slightly last week by 200,000 barrels to hit a new 20-year high just above 1.143 billion barrels, the data showed.

"The EIA drawdowns, despite being across-the-board, were minimal and so overall, I view the latest data as neutral," said Mark Waggoner, president of Excel Futures in Bend, Oregon.

The Organisation of the Petroleum Exporting Countries trimmed its forecast demand for the group's crude this year and next, denting investors' confidence that prices would move much above the recent range of US$71-US$75 a barrel.

Oil investors, as with their counterparts in other commodities markets, have had to deal with worries about a slowing recovery pace in the US, the world's biggest fuel consumer.

Those worries further swelled as the Organisation for Economic Co-operation and Development, in its latest assessment, said the global economy was slowing more than expected and that monetary stimulus should be extended or stepped up if the slowdown persisted.

The oil market has spent much of the year in lockstep with equities and negatively correlated to the US dollar.

On Thursday, however, oil moved in a different direction as Wall Street was lifted by the day's jobless clams and trade gap data.

Meanwhile, the US dollar was up slightly against a basket of currencies, helped by the latest US economic data.

- Reuters