Oil's Dip.
Oil prices fall on expectations that latest weekly EIA data will show higher inventories, but concerns over Europe is keeping the price from further slides. Reuters

Oil futures edged lower on Wednesday, giving up earlier gains due to pervasive investor jitters that Europe may fail to deliver a firm solution to its sovereign debt crisis.

Investors remained cautious ahead of a meeting of euro zone heads of state at 1730 GMT after EU officials said there was little likelihood of concrete details or numbers being agreed.

Brent crude futures, which have lagged the U.S. crude rally of 6.5 percent in the last three sessions, were 31 cents lower at $110.60 a barrel by 1242 GMT.

U.S. crude fell by 65 cents to $92.52 a barrel, after posting gains yesterday of around 1.6 percent.

European economic uncertainty is keeping a lid on prices, but the resurgence in Chinese demand stops markets falling too far, said Jefferies Bache oil broker Christopher Bellew.

The prospects for a comprehensive deal to resolve the euro zone debt crisis looked dim, with deep disagreement remaining on critical aspects of the potential agreement, including how to give the region's EFSF bailout fund greater firepower.

There is an alarming vacuum as far as facts are concerned when you consider that we were told a 'comprehensive solution' would be revealed at today's summit, David Hufton wrote in a note from PVM. There is no agreement it seems on two of the key pillars of a solution - the Greek debt haircut level and the mechanism to increase the EFSF's fire power.

Brent's premium to U.S. crude was quoted at $17.99 after it closed on Tuesday at $17.75, the narrowest settle since early July and coming in sharply from a record of about $28 a barrel on October 14.

There's been a lot of hope that the euro zone would get their act together. But maybe that was a little bit overdone on the upside and a little over optimistic, said Tokyo-based risk manager Tony Nunan of Mitsubishi Corp.

U.S. INVENTORIES

The U.S. Energy Information Agency's weekly oil stockpiles data are due at 1430 GMT, which according to a Reuters poll should show an increase as imports rebounded from a steep drop in the previous week.

Stockpiles of crude are expected to have risen 1.3 million barrels for the week ended October 21.

We will we watching the DOE figures carefully after the API showed an increase in stockpiles yesterday to see if the trend is confirmed, Credit Agricole CIB's senior oil analyst Christophe Barret said.

According to data from industry group American Petroleum Institute late on Tuesday, U.S. crude oil stocks rose 2.7 million barrels last week, more than double the 1.3 million barrel build forecast by the Reuters poll.

But total U.S. oil inventories have tightened and are approximately 8 percent lower than the same time last year at 332.9 million barrels, according to the EIA.

The Midwest crude surplus is subsiding, at least temporarily, with stocks at Cushing, Oklahoma -- delivery point for WTI -- plunging by more than a quarter since hitting a 42 million barrel high this spring.

(Additional reporting by Seng Li Peng in Singapore; Editing by Jane Baird)

Crude oil