In a tumultuous and fluctuating trading session on Thursday, oil prices experienced a lower settlement as substantial increases in weekly gasoline and distillate stocks overshadowed a larger-than-anticipated drawdown in crude stocks.

Brent crude concluded the session down by 66 cents, marking a 0.8% decline to $77.59. The day witnessed considerable volatility, with fluctuations of over $1 in both upward and downward directions. Simultaneously, U.S. West Texas Intermediate crude futures settled down by 51 cents, representing a 0.7% dip to $72.19.

The primary factors contributing to the downturn were diminished fuel demand and the release of data from the U.S. Energy Information Administration (EIA) showcasing extensive inventory increases. Gasoline stocks observed a substantial surge, rising by 10.9 million barrels to reach 237 million barrels. This surge marked the most significant week-on-week increase in more than 30 years.

Concurrently, distillate stocks experienced a notable upswing, climbing by 10.1 million barrels to a total of 125.9 million barrels. The data also revealed that distillate product supplied, acting as a proxy for demand, plummeted to its lowest level since 1999.

Lingering concerns in the shipping sector persisted as Yemen's Iran-backed Houthis claimed on Wednesday that they had "targeted" a container ship heading for Israel. U.S. Central Command confirmed that the militant group had fired two anti-ship ballistic missiles in the southern Red Sea the day before.

Earlier in the session, downbeat economic data exerted downward pressure on prices. Business activity in the Euro zone contracted in December, and German inflation registered an increase, potentially influencing the European Central Bank's decision to maintain interest rates at a steady level.

Despite the lower settlement on Thursday, both oil benchmarks had seen a positive turn on Wednesday, gaining approximately 3% and settling higher for the first time in five days. Support for oil prices also emerged from data released by the American Petroleum Institute, revealing a substantial drawdown of 7.4 million barrels in crude stocks, doubling the anticipated decrease.

Adding a geopolitical element to the market sentiment, two explosions on Wednesday resulted in nearly 100 casualties and numerous injuries during a ceremony in Iran commemorating Commander Qassem Soleimani, who was killed by a U.S. drone in 2020. Iran swiftly vowed retaliation, injecting an element of geopolitical tension into the oil market landscape.

The lower settlement for oil on Thursday reflected the impact of heightened gasoline and distillate stocks, overshadowing the positive influence of a larger-than-expected crude stock drawdown. The complex interplay of factors, including fluctuating demand, inventory surges, and geopolitical developments, underscores the intricate nature of the oil market and the need for market participants to navigate dynamic conditions with vigilance.