US crude for August fell 33 cents to $97.72 a barrel by 0531 GMT, still up about 1.6 percent this week, while Brent shed 33 cents to $118.45, less than $9 below this year's peak above $127.
Moody's Investors Service jolted White House debt talks on Wednesday with a warning that the US may lose its top credit rating in the coming weeks, piling pressure on Washington to lift its debt ceiling.
Earlier, Federal Reserve Chairman Ben Bernanke said the US central bank was ready to ease monetary policy further in what would be a third round of so-called quantitative easing if economic growth and inflation slowed much more.
"People are still skeptical about Bernanke's comments," said Tony Nunan, a risk manager with Tokyo-based Mitsubishi Corp.
"With their hands tied by the budget, it seems to me they would have a hard time pushing through with another round of quantitative easing. If there is one, investors would come back and there would be more financial demand for oil futures."
The Fed's second round of quantitative easing, or looser monetary policy to stimulate job creation and economic growth, concluded at the end of June. A continuation of last week's disappointing US employment data may raise the need for a third one.
"Bernanke is making a brave statement," Nunan said. "It's important for him to come out and say they want to keep the focus on job growth."
Higher employment boosts fuel consumption. Average US gasoline demand in the last four weeks was down 0.9 percent from year-ago levels, the Energy Information Administration said on Wednesday.
Oil prices on Wednesday also rose after government figures showed US crude inventories fell a bigger-than-expected 3.12 million barrels in the week to July 8.
Gasoline stocks fell by 840,000 barrels, the Energy Information Administration said, compared with projections for a 200,000-barrel rise, while distillates, including heating oil and diesel, rose 2.97 million barrels, more than seven times as much as expected.
Brent's premium to US crude widened to $22.74 on Wednesday after closing at $20.32 a day earlier.
DEMAND GROWTH
World oil demand growth will accelerate next year, adding to the pressure on available supplies, the International Energy Agency said on Wednesday, contradicting a more conservative outlook from producer group OPEC.
In its first 2012 forecast in a monthly report, the IEA said oil use would grow by 1.47 million barrels per day (bpd) to 91 million bpd. The agency also trimmed its estimate of demand growth this year to 1.20 million bpd.
"As long as demand in developed nations doesn't tank or crash, the market can still have good support because of demand from emerging markets," Nunan said.
BP halted oil output from the Valhall field in the North Sea on Wednesday after a fire on its production platform forced the evacuation of hundreds of workers, but the company said there was no risk of oil spills.
In other markets, the dollar fell, gold climbed to a record high and yields on Japanese government bonds reached eight-month lows, after Moody's warning spurred a rush towards safe-haven assets.
The IMF joined Germany on Wednesday in pushing for private sector investors to help cut Greece's debt mountain as the euro zone sought to break an impasse on how and when to grant the country urgent aid.
Copyright Reuters, 2011