By Alex Lawler, Chua Baizhen and Peg Mackey
UPDATE 1: Renewed fears about economy saw oil prices slip $4 after earlier gains.
Oil eased near $41 a barrel on Wednesday before the release of a US government report expected to show a rise in crude stocks in the world's top consumer.
US crude stocks are likely to rise by 2.9 million barrels, according to a Reuters poll. The US Energy Information Administration releases its report at 09.30 pm, UAE time.
"The market is very much range trading. We got down to the bottom of the range yesterday, and we might get to the top of the range today if there is something supportive in the statistics," said Christopher Bellew, broker at Bache Commodities.
US crude fell 36 cents a barrel to $41.22 by 04.22pm, UAE time after plunging nine percent on Tuesday as bleak US economic data stirred demand concerns. London Brent climbed 57 cents to $44.30.
Brent is trading at an atypical premium to US crude as high inventories pressure the US benchmark and, according to some analysts, healthier crude demand in Europe supports Brent.
Oil drew support from equities, which advanced after reassuring corporate results on Wall Street, and a weaker US dollar. Dollar weakness can boost investor demand for oil and commodities.
Fuel demand has weakened, especially in developed economies, because of the global economic crisis, boosting inventories and knocking prices down from a record high of $147.27 a barrel hit in July.
On Tuesday, an American Petroleum Institute (API) report on Tuesday showed crude inventories rose by 800,000 barrels. The EIA data is seen by traders as a more complete snapshot of supplies.
The API has begun releasing its weekly inventory report on Tuesday afternoons, a day ahead of the EIA.
Supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) since the second half of last year have offered prices some support against weakening demand.
Besides the EIA report, traders were also watching for the result of a two-day Federal Reserve meeting due out later in the day.
Policymakers are expected to hold their target for official borrowing costs in a range of zero to 0.25 percent. (Reuters)