New York's main contract, light sweet crude for delivery in May, was down 16 cents to 85.72 dollars a barrel. Brent North Sea crude for May shed 14 cents to 85.45 dollars per barrel.
"The market had gotten ahead of itself when it marched towards 87 dollars. There are no physical reasons why prices should be moving so high," said Jason Feer, vice president with energy market analysts Argus Media.
Investors were taking a step back from the notion that recent positive economic data would spur stronger oil demand after a government report on supplies showed a larger-than-expected increase in crude stocks, Feer said.
"Even if people are justified in being so optimistic (about oil demand), there's an awful lot of spare oil production capacity and refining capacity in the world," he added.
The US Energy Information Administration (EIA) said Wednesday that American oil inventories rose two million barrels in the week ending April 2. That was far more than forecasts for a gain of 1.4 million barrels.
Gasoline stockpiles tumbled 2.5 million barrels, while distillates -- which include diesel and heating fuel -- rose 1.1 million barrels. Crude futures briefly hit an 18-month high on Tuesday, as the market found support from a batch of encouraging economic indicators in the United States.
The New York contract touched 87.09 dollars -- the highest level since October 9, 2008. The same day, the EIA said in its monthly report it was lowering its estimate for demand in the US to 160,000 barrels of crude per day, compared with 200,000 in its previous report.
It also kept its global demand growth forecast at 1.5 million barrels per day for 2010, after two consecutive years of decline.
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ