U.S. West Texas Intermediate (WTI) crude futures settled down $1.35, or 3.3%, at $39.92 a barrel after falling 5% earlier in the session.
Analysts said the mixed price moves on Thursday were due to demand concerns with COVID-19 infections increasing and raising the prospects for lockdowns to be reimposed.
US inventories fell by 10.6 million barrels last week, compared with analyst expectations for a gain, Energy Information Administration data showed.
Getty ImagesBrent is on track for a fourth month of gains and US crude is heading for a third as both rise from depths hit in April, when much of the world was in lockdown.
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US crude was down 4 cents, or 1%, to $39.88 after dropping 3.3% in the previous session, also off lows not seen since July 10.
Bjornar Tonhaugen, head of oil markets at Oslo-based Rystad Energy, said traders will next week closely monitor oil output increases by the Organization of the Petroleum Exporting Countries (OPEC) and its allies.
"There's an assumption those tankers pretty much let go of all their oil and so the expectation is that the OPEC cuts are going to lead to bigger draws in the United States", said Phil Flynn, senior analyst at Price Futures Group in Chicago.
Oil prices rose on Friday, recovering further ground after touching three-week lows in the previous session, hit by a record decline in USA growth as the coronavirus ravaged the world's biggest economy and oil consumer.
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Deaths from COVID-19 topped 150 000 in the United States on Wednesday, while Brazil, with the world's second-worst outbreak, set new daily records of confirmed cases and deaths.
Attempts to provide relief amid the outbreak were in disarray as Republicans in the USA disagreed over their own plan for providing $1 trillion in new coronavirus aid on Tuesday.
But slow demand is better than nothing, and to encourage activity in other parts of the world Saudi Arabia may reportedly cut its September official selling price for crude sold in Asia, according to sources on Thursday.
Analysts are concerned about the risks to any USA recovery, while a new Federal Reserve policy statement due to be released later on Wednesday afternoon will show how seriously central bankers assess them.
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