Oil futures turned mixed in late trading on Wednesday after leaping to three-month highs on U.S. government data showing a sharp drawdown in domestic crude stockpiles last week and amid worries about lower North Sea oil production.
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Trading was choppy and the pace accelerated late in the session, with U.S. crude closing lower for the first time in four sessions. After turning negative late, Brent crude recovered and posted small gain for the day.
Hopes for more monetary stimulus from the U.S. Federal Reserve to help keep economic growth from stalling kept U.S. crude's losses in check.
Expectations that the European Central Bank would act soon to help debt-strapped members of the euro zone helped Brent crude from falling to negative territory at the close.
In London, Brent crude futures for September delivery settled at $112.14 a barrel, edging up 14 cents. In the morning, it shot up to an intraday high of $113.27 a barrel, the highest since May 8, after the EIA data.
U.S. September crude closed at $93.35, down 32 cents. It hit a session high of $94.72, the highest since May 15.
"Despite the big drawdown in crude stocks, U.S. inventories are still above their five-year average," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.
U.S. crude oil stocks fell 3.7 million barrels to 369.9 million in the week to Aug. 3, the Energy Information Administration (EIA) said, well above the forecast in a Reuters poll for a 300,000-barrels drawdown.
The drawdown was smaller than the 5.4 million barrels reported by industry group American Petroleum Institute on Tuesday. Still, it reinforced a market view of tightening supplies in the world's biggest oil consumer.
EIA data showed U.S. crude stockpiles have fallen in eight of the past 10 weeks since May 25, when they reached their highest level in nearly 22 years.
The late surge in trading pulled up volumes, with Brent up 5 percent against its 30-day average and U.S. crude up 7 percent, from its 3o-day average, according to Reuters data.
Brent's premium against U.S. crude rose to $18.79, after closing at $18.33 on Tuesday.
"Today's larger-than-expected draws across the board have initially added to a complex already gaining strength, leading to new highs in the process," said Jay Levine, a broker at Enerjay Llc in Portland, Maine.
Brent has risen about 25 percent and U.S. crude 21 percent since the end of June, partly on expectations the world's largest economies would take more measures to stimulate growth.
Some signs of oversold or near oversold conditions after the extended price run-up had led some investors to trim their long positions, analysts said.
Brent has found support from news of a major round of maintenance in the North Sea over the next two months, which will cut to a record low production of the four grades of crude that underpin the benchmark contract.
The four grades -- Brent, Forties, Oseberg and Ekofisk -- were scheduled to pump 720,000 barrels per day in September, down more than 50,000 bpd from the August level, due to oilfield maintenance and natural aging declines.
NORTH SEA IMPACT
The sharp cut in production from Britain's Buzzard oil field feeding the key Forties stream, which usually sets the price of the North Sea benchmark, could leave Brent open to a "Super Squeeze," said Swiss energy market analyst Olivier Jakob.
"We do not want to be short (of) the Brent front spreads until the end of the Buzzard maintenance, as the risk is just too great to see Brent being squeezed," Jakob said.
The price spread between the September and October Brent contracts
Backwardation occurs when the nearest month contracts have a higher price than succeeding months.
U.S. MIDWEST DRAW, REFINERY FIRE
The big drawdown in U.S. crude was led by a nearly 2.9- million-barrel drop in Midwest stocks that followed the shutdown of Enbridge Inc's 318,000 barrel per day Canadian Line 14 crude pipeline to the Chicago area.
EIA data showed imports of crude to the Midwest dropped 65,000 bpd last week, while supplies of Canadian crude to the United States fell 158,000 bpd in the same period.
Also supportive for crude futures was the shutdown of Chevron Corp's Richmond, California, refinery due to an hours-long fire at its crude unit on Tuesday.
Traders were also weighing forecasts that Hurricane Ernesto, downgraded to a tropical storm on Wednesday, was headed toward the Gulf of Mexico, where Mexico's main oil operations are located.