Crude futures settled slightly lower Thursday, wavering between gains and losses for most of the session as markets await President Barack Obama's address on the economy.
Light, sweet crude for October delivery settled 29 cents, or 0.3%, lower at $89.05 barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange closed $1.76 lower at $114.56 a barrel.
Oil prices stalled in the push towards $90, held back by a decline in the stock market ahead of President Obama's speech on the economy later Thursday. Obama is expected to announce a new jobs plan in his address to a joint session of Congress later Thursday, which could amount to a stimulus of as much as $400 billion over the coming year for the world's largest oil consumer.
"Everyone is waiting to hear about this jobs package," said Matt Zeman, market strategist at Kingsview Financial.
The fate of the broader economy has become the main driver of crude prices. Traders are concerned that Europe's debt crisis could push major economies back into recession, hurting oil demand.
In remarks earlier Thursday, Federal Reserve Chairman Ben Bernanke said the central bank has tools that can offer more support to the U.S. economy, but declined to commit to any action in September.
The Dow Jones Industrial Average fell to session lows following the central banker's remarks. Oil futures are closely following the stock market as a measure of economic growth expectations.
"Everything that the equities markets are using as a gauge has been flowing through to crude as well," said Matt Smith, an analyst with Summit Energy.
Concerns about the broader economy kept oil prices from rising after a larger-than-expected decline in U.S. oil stockpiles.
U.S. commercial oil inventories fell by four million barrels last week, the Department of Energy said in a weekly survey released Thursday. Analysts attributed the decline to Hurricane Irene and Tropical Storm Lee, which curtailed imports.
A decline in oil stockpiles is typically bullish for prices, and Nymex futures briefly jumped as high as $90.23 after the survey's 11:00 a.m. release. But the decline was tempered by a surprise increase in fuel inventories, as consumers cut back on demand in the wake of the storms.
Gasoline inventories rose 200,000 barrels last week, while stocks of distillates, including heating oil and diesel, rose 700,000 barrels, the DOE said.
Analysts had expected a 1.6-million-barrel decline in crude stocks, according to a survey by Dow Jones Newswires. They expected gasoline stockpiles to drop 1.7 million barrels and distillate inventories to fall 300,000 barrels.
Gasoline demand last week fell 3% to 9 million barrels a day, the lowest level for the first week of September since 2003, according to the DOE.
Front-month October reformulated gasoline blendstock, or RBOB, settled 0.78 cent lower at $2.8852 a gallon. October heating oil settled down 3.13 cents, or 1%, to $3.0443 a gallon.