Light, sweet crude for April delivery was down 41 cents by the afternoon in Europe, trading at $50.98 a barrel on the New York Mercantile Exchange. Prices for heating oil were down fractionally at $1.4560 a gallon.
In London, Brent crude fell 44 cents on the International Petroleum Exchange, fetching $49.
The U.S. energy department reported Thursday that inventories of crude oil fell by 600,000 barrels last week to 297 million barrels, or 8 percent above year-ago levels.
Gasoline inventories rose by 1.8 million barrels last week to 223.5 million barrels, or 9 percent higher than last year.
However, the supply of distillates — heating oil, diesel and jet fuel — slipped by 700,000 barrels to 111.8 million barrels, or 3.5 percent below year-ago levels.
The persistent cold weather gripping western Europe and the U.S. Northeast, the two largest heating-oil markets, is expected to boost heating fuel consumption and further strain supplies.
A greater cause for concern for traders, however, would be the Organization of Petroleum Exporting Countries' decision on production output in Isfahan, Iran, on March 16. Oil prices have seesawed in the past week on comments from OPEC members, signifying traders' overwhelming jitters.
``Prices will stay in the high $40s to the $50 mark until the next OPEC meeting,'' said Victor Shum, oil analyst at Texas-headquartered Purvin & Gertz, an energy consultant agency in Singapore.
In Edinburgh, John Waterlow of Wood Mackenzie Consultants, said the market would likely stay bullish beyond March 16 because OPEC appeared determined to keep prices up in the long term.
``There is this constant stream of statements that imply OPEC are looking at the market very closely and they want to keep the price as high as the world can sustain,'' he said.
Because ``the world hasn't suffered any serious dislocation as a result of high oil prices,'' there is little incentive for producers to settle for less profits, he said.
Oil prices retreated slightly on Wednesday after the president of OPEC sought to quell concerns that the group would cut production. Sheik Ahmad Fahad al Ahmad al Sabah, who is also Kuwait's oil minister, said the cartel won't allow prices to ``surge to record levels.''
His comments tempered worries of a possible supply cut in March. Those concerns were fueled in part by comments from Saudi Oil Minister Ali Naimi, who said the kingdom would not let supply rise above current levels during the second quarter.
Crude futures are roughly 49 percent higher than a year ago after rallying nearly $3 a barrel on Tuesday. The other factors moving the market are the declining value of the dollar and the world's tight supply-demand balance