NEW YORK (Dow Jones)--Crude futures rebounded Wednesday after a government report showed a drop in U.S. oil inventories, though the data also suggested a weakening economy is lowering fuel consumption.

Light, sweet crude for July delivery recently traded 10 cents higher at $99.47 a barrel on the New York Mercantile Exchange, after falling as low as $98.10 a barrel earlier in the session. Brent crude on the ICE futures exchange traded $1.39 lower at $118.77 a barrel.

U.S. oil inventories fell by 3.4 million barrels last week, the Energy Information Administration said Wednesday, a larger drop than the 500,000-barrel decline analysts had expected. Gasoline stocks rose by 600,000 barrels, while stocks of distillate, which include heating oil and diesel, fell by 100,000 barrels.

A drop in oil stockpiles often means supplies are growing tighter, which tend to push futures higher. But analysts cautioned that the report also contained signs that the economy's recent weakness is leading to lower fuel consumption.

The data showed a decline in implied demand for oil and fuel products, with average demand over the past four weeks falling by 3.2% compared with the same period last year. Refinery runs fell to 86.1% of capacity from 87.2% last week.

"The total product demand took a pretty big hit," said Carl Larry, director of derivatives and research at Blue Ocean Brokerage. "Diesel demand is down, jet fuel demand is down. That just doesn't paint a rosy picture on the economy right now."

Weak oil-demand data added to a set of economic reports earlier Wednesday that pointed to the fragility of the U.S. economy. Conditions for manufacturers in the New York region deteriorated in June, according to the Federal Reserve Bank of New York's Empire State Manufacturing Survey. The index of general business-conditions plunged by 20 points to -7.8, falling below zero for the first time since November.

Separately, data showed U.S. core inflation posted its biggest gain in more than three years, according to the Labor Department.

The reports initially sent crude prices lower, along with the stock market. Analysts said that if equities remain weak, oil futures could follow despite traders' first reaction to the weekly inventory data.

"By the end of the day, if the stock market remains weak, then that will continue to put pressure on petroleum as well. The equities seem to be one of the driving factors," said Kyle Cooper, managing partner of IAF Energy Advisors.

The Dow Jones Industrial Average was recently down 114 points, or 0.9%, to 11962.

Oil prices have taken cues from the stock market and economic indicators in recent weeks after tumbling from nearly $115 a barrel earlier this year. A slowdown in the U.S. economy has risen to become one of the major concerns among oil traders. However, those fears have combined with continued worries about unrest in the Middle East and expectations of an economic rebound later this year to keep oil confined to a trading range between $95 and $105 a barrel.

Front-month July reformulated gasoline blendstock, or RBOB, recently traded 2.56 cents, or 0.8%, lower at $3.0390 a gallon. July heating oil recently traded 2.48 cents lower at $3.1010 a gallon.