U.S. oil futures closed lower on Thursday as an ample global supply picture weighed on prices while Brent's front-month June contract headed to expiration.
Trading was choppy as market participants tried to square bullish factors including U.S. inventory data, spot demand for crude in Asia and Middle East unrest with basic supply fundamentals.
"The market is really in a pause," said Harry Tchillgurian, analyst at BNP Paribas. "The longer the price stays up, the more you invite supply to come back to the market."
Dollar-denominated oil prices had been lifted by a weaker U.S. currency in early trading on Thursday, before the dollar reversed losses.
Prices were also supported earlier by news that Iran's Revolutionary Guard fired warning shorts over a Singapore-flagged oil products tanker in international waters in the Gulf. Iran appeared to be trying to intercept the ship in order to settle a legal dispute, according to a U.S. official.
But traders focused on lingering oversupply and shaky economic data globally.
While crude stocks in the United States fell for a second straight week, by 2.2 million barrels, following four months of steady gains, inventories were still almost 90 million barrels higher than this time last year.
"While the total draw of 2.2 million barrels was more than expected, we will note that supply surplus against five year averages remains substantial at more than 100 million barrels," Jim Ritterbusch, president at Ritterbusch & Associates, said in a research note.
A surprise increase in output in March from the No. 2 U.S. oil-producing state, North Dakota, added to supply concerns. The International Energy Agency also warned on Tuesday that the global oil glut is building.
Global demand growth for fuels was also in question, with weak economic indicators pressuring crude oil.
China, the world's top energy consumer, saw its economy lose more steam in April despite easier monetary policy, while Europe's largest economy, Germany, slowed in the first quarter. In the United States, retail sales were flat in April, dampening hopes of a sharp rebound in growth in the second quarter.