US oil settles down 0.8%, at $44.74 a barrel

Essam Al-Sudani | Reuters

Oil prices fell nearly 1 percent on Thursday as the government's storm monitor altered forecasts for the path of the latest U.S. hurricane, snuffing out an early rally that was prompted by fears of storm damage U.S. East Coast oil installations.

Comments from Russia's foreign minister also eased fears over escalation in the Syrian war.

Hurricane Joaquin, which strengthened into a powerful Category 3 storm and was moving over the Bahamas, will hit land about 100 miles east of New York City in eastern Long Island as a tropical storm, the National Hurricane Center's (NHC) latest report showed.

Earlier, the NHC had forecast that the storm would hit the New Jersey coast and New York Harbor, home to several oil refineries, pipelines and other energy infrastructure.

Read MoreHurricane Joaquin gains strength: East coast prepares

U.S. West Texas Intermediate crude closed down 0.8 percent, at $44.74 a barrel. Brent crude the global benchmark for oil, was down 66 cents at $48.40 a barrel after hitting a one-week high at $49.84.

fell to a three-year intraday low on heavy surpluses. It was last down nearly 3 percent at $2.630.

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A Houston-based broker said oil bulls bought crude in early trade as gasoline rallied more than 3 percent on the storm fears. But gasoline gave back those gains and fell about 1 percent in later trade.

Traders watch Atlantic hurricanes because they can lead to precautionary shutdowns of oil installations, and in exceptional cases, like Hurricane Sandy in 2012, damage energy infrastructure.

The NHC suggested earlier on Thursday that Joaquin could follow a course similar to Hurricane Sandy. But with the forecast track still uncertain and the storm days away from New York, energy firms said they were on alert but not shutting any facilities yet.

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"The latest update on Joaquin is bearish," said Scott Shelton, crude oil broker and commodities specialist at ICAP in Durham, North Carolina.

Heightened geopolitical risk from the worsening war in Syria also boosted crude futures in Thursday's early trade.

Russia launched air strikes in Syria in support of President Bashar al-Assad's government on Wednesday in its biggest Middle East intervention in decades. The attacks raised the specter of Washington and Moscow running air strikes in the same region, but without coordination.

But comments from Russian Foreign Minister Sergei Lavrov on Thursday reduced the risk premium that had pumped up oil prices, Again Capital founding partner John Kilduff told CNBC.

Russia does not consider the U.S.-backed Free Syrian Army rebels a terrorist group and they should be part of a political solution in Syria, Lavrov said on Thursday.

Read MoreRussia strikes in Syria: Why you should be worried

"This is absolutely necessary for the political process to get hold and to be sustainable. We consider terrorists those who have been recognized as such by the United Nations and by the Russian Federation legal system," Lavrov told a news conference at the United Nations.

Those comments "calmed the tensions around the situation for now," Kilduff said. "I think the air has gone out of the Syria situation for now."

Also on Thursday, a U.S. defense official confirmed that talks between the U.S. and Russian militaries could take place within the next day, possibly via secure video-conference or in person. The Pentagon aimed to involve both civilian and uniformed defense officials in the talks.

More data suggesting an economic slowdown in China and a spike in weekly U.S. oil inventories also weighed on markets.

—CNBC's Tom DiChristopher contributed to this story.