Crude Drops Off Record High

"A month ago we may have seen the market up $2 on today's news. That hasn't happened today," he continued. "The EIA figures substantiated what people are already thinking about demand for energy."

However, the early climb triggered fresh short positions, which hammered the near-term contract back downward.

The futures strip has been in backwardation for the past week or so, with front-month contracts trading for higher prices than contracts further out. In such a situation, holders of oil are encouraged to sell immediately to get a higher price, according to Jim Williams, economist at WTRG Economics.

Traders may have followed this line of thinking and sold the September crude contract once it reached record territory, Williams said.

Meanwhile, energy stocks moved in step with futures prices, climbing early on and then falling off later in the day. The CBOE Oil Index was recently down 1.6% at 738.95. Exxon Mobil (XOM Quote) was trading 0.7% lower at $84.55.

Anadarko Petroleum (APC Quote) was upgraded by BMO Capital Markets to market perform from underperform, lifting its shares 0.3% to $50.47.

Magellan Midstream (MMP Quote) was upgraded by Citigroup to buy from hold. However, shares of Magellan fell 0.4% to $45.12. Sempra Energy (SRE Quote) was upgraded at JP Morgan to overweight from neutral, raising the stock 2.3% to $53.91.