U.S. crude fell more than $1 a barrel on Wednesday as traders took profits ahead of a government inventory report that is expected to show a build in crude stocks, while Brent edged lower, propped up by geopolitical tensions in Ukraine and Libya.
U.S. commercial crude oil inventories rose 3.5 million barrels last week, the American Petroleum Institute (API) said, versus a Reuters poll that forecast a build of 500,000 barrels.
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The industry group's data also showed a 1.5-million-barrel draw at the Cushing, Oklahoma delivery hub, and a 1.4 million-barrel-draw on gasoline stocks in the week to May 23, which could be supportive for prices.
Traders await the U.S. Energy Information Administration's(EIA) official report at 1100 EDT (1500 GMT) on Thursday.
An uneasy calm returned to Donetsk in eastern Ukraine after government forces killed dozens of rebel fighters earlier this week.
But traders were not reassured as the European energy commissioner said it is unlikely Kiev and Moscow will resolve all issues in the gas price dispute before Sunday's June 1 deadline.
"This is profit-taking ahead of the EIA and API reports," said Bill Baruch, senior market strategist at iitrader.com in Chicago. "With regards to Ukraine, there is a positive aspect in that there is some light at the end of the tunnel. But as fighting picks up, there is worry about the gas supply and this is going to directly affect Brent."
U.S. oil settled down $1.39 at $102.72 a barrel, and Brent fell 21 cents to settle at $109.81 a barrel.
Libyan oil output shrank again because an armed group disrupted operations at Hariga port.
However, Libya's turmoil has largely been priced in, traders said. They were focused instead on U.S. economic data from Tuesday showing an unexpected rise in long-lasting manufactured orders in April and a boost in consumer confidence in May.
The data helped push the U.S. dollar to an eight-week high and made commodities like oil, which are priced in dollars, more expensive.
Marathon Petroleum said its 522,000 barrels-per-day (bpd) refinery in Garyville, Louisiana, was partially shut due to a windstorm. That put more pressure on crude prices.
U.S. gasoline futures settled 1.07 cents up at $3.0059 a gallon, having risen from an intra-session low of $2.9812 a gallon after the Marathon refinery shutdown was announced.
Also weighing on oil prices, European and U.S. equities eased after two days of record highs.
Investors' appetite for equities has been supported by recent strong U.S. economic data and expectations of monetary easing by the European Central Bank, while the yield on the benchmark U.S. 10-year Treasury note touched below 2.46 percent, its lowest level since July.
(By Elizabeth Dilts; Additional reporting by Robert Gibbons in New York, Lin Noueihed in London and Manash Goswami in Singapore; Editing by Louise Ireland, David Evans, Marguerita Choy, Andrew Hay and Paul Simao)