Benchmark oil for March delivery lost 25 cents to settle at $76.98 a barrel on the New York Mercantile Exchange, after hitting a day high of $78.04 earlier in the session. In London, Brent crude lost 14 cents to settle at $75.92 a barrel on the ICE futures exchange.

Crude inventories rose by 2.3 million barrels, or 0.7 percent, to 329 million barrels, which is 6.1 percent below year-ago levels, according to the Energy Department's Energy Information Administration's weekly report.

Oil made sharp gains earlier in the week as money poured into energy commodities on worries about inflation, said Kenneth Medlock, a Rice University energy economist.

"Massive U.S. debt will persuade people to buy oil contracts and hold them," Medlock said.

The pressure to move money into commodities increases every time investors see headlines like the recent Treasury Department announcement that the government will soon reach its borrowing limit, Medlock said.

Congress already has pushed the debt ceiling higher by $290 billion in December, and it's working on another measure that would allow the U.S. to borrow even more.

Analysts said oil prices were also rising in anticipation of growing global demand. During the past several months, investors have bet that China and other developing countries will need more fuel this year, helping to push oil prices to a 15-month high in January.

Meanwhile, gasoline for March delivery gained 1.83 cents to settle at $2.0362 a gallon on the New York Mercantile Exchange.

The Energy Information Administration reported that gasoline stockpiles fell by 1.3 million barrels in late January. Supplies sank as U.S. refineries continued to churn out less fuel.

The EIA report said refineries are operating at the lowest level on record, other than a few weeks in 2008 and 2005 when hurricanes ripped through the Gulf of Mexico and forced many to shut down. The slowdown in American refining comes as higher oil prices squeeze profit margins even tighter. Refineries like Valero Energy Corp. say they simply cannot pass along the higher crude costs to motorists.