Oil fell more than 3 percent on Thursday, wiping out recent gains, as euphoria from the first U.S. inventory drawdown in months faded and focus returned to oversupplies in crude and gasoline.
A stronger dollar also weighed on the energy complex, making raw materials became less affordable to holders of the euro and other currencies.
U.S. crude futures closed down $1.99, or 3.3 percent, at $58.94 a barrel. The contract had rallied more than $2 to a high of $62.58 in the previous session.
U.S. crude inventories fell almost 4 million barrels last week, their first weekly decline since January, government data showed on Wednesday. But crude stockpiles still stood at a discouragingly-high 487 million barrels. While weekly demand for gasoline was higher, stocks of the fuel also rose despite the approach of the peak U.S. driving season.
"There is some disappointment out there that the fundamentals for gasoline and oil products aren't improving as quickly as some people would like, to provide support for the broader rally in crude that we've been seeing," said Carl Larry, director of business Development for oila and gas at Frost & Sullivan.