Updated from 1:23 p.m. EST

Oil continued its erratic behavior Wednesday, swerving in and out of negative territory despite an Energy Department report that showed an unexpected decline in U.S. crude inventories.

The May crude contract eventually settled up 33 cents to $52.44 on Nymex, after trading above $53 in the immediate aftermath of the inventory report. Gasoline futures rose a fraction of a cent to $1.573 a gallon.

The Energy Department said crude oil inventories fell by 1.8 million barrels last week, the first decline in nine weeks and a surprise to analysts that expected a climb of about 1.4 million barrels. Gasoline fell by 1.5 million gallons, more than the expected 275,000 decrease.

"The draw on crude oil was a big surprise and is very bullish," says Kevin Kerr, president of Kerr Trading International. Still, Kerr notes, inventories remain at their highest levels in three years. "From an emotional standpoint, this makes people nervous, but there is really no reason yet to be," Kerr says.

Kerr will be eyeing the next few weekly reports for a pattern. More declines could send prices back up to the $55 per barrel "major resistance level," he says.

Technical failures at Kansas, Louisiana and Texas refineries Tuesday got traders concerned about gasoline supplies ahead of the peak summer demand season. But while Wednesday's inventory data showed a decline in gasoline stocks, it followed a report last week that showed inventories rising by 800,000 barrels.

Still, fears of shortages in refining capacities have helped push oil prices up this week after a two-week decline, signaling to traders that the $50 per barrel touched earlier this week was just a dip in the upward curve. Crude prices this time a year ago were about $37 a barrel.

OPEC has recently announced it would ramp up its production capacity to 32.7 million barrels a day. The cartel is responsible for about 40% of the world's oil supply.

Jim Glassman, a managing director at J.P. Morgan, said Tuesday in a speech at the America's Oil and Gas Producers conference in New York, that "OPEC, at the end of the day, is restricted to markets just as we all are," and its in the cartel's best interest to keep the global economy moving forward, he said.

Some OPEC members, though, are resolved to keep the profits of their land's rich resources from slipping into the hands of major oil companies. In Venezuela, the government decided to increase its corporate income tax to 50%, from 34%.

Gero Farruggio, head of the consultancy firm Wood Mackenzie's Latin America Upstream team, said in a report Tuesday that the tax hike in Venezuela could reduce the value of foreign operators' Venezuelan holding by $4.3 billion. The companies with the most exposure in the region are

ConocoPhillips

, which could potentially have a $1.2 billion wipe out in after-tax value of its property, and

Total S.A.

(TOT) - Get Report

, which could see a $1 billion reduction in value.

This announcement is the latest -- but biggest -- move by the Chevez administration to extract a greater rent from the upstream oil industry in Venezuela," Farruggio said in the note.

In earnings news,

XTO Energy

(XTO)

, the natural gas producer, said its first-quarter earnings rose 77% from a year ago to $166.3 million, or 48 cents a share. The results included a charge related to derivatives hedging and non-cash compensation. Before the charge, the company earned $190.7 million, or 55 cents a share, missing the Thomson First Call estimate by 2 cents a share. Shares were down $1.04, or 3.26%, to $30.86.

Lufkin Industries

(LUFK)

, a supplier of oil-field equipment, said its earnings rose fourfold on increased sales in all business segments. Net income for the first quarter was $7.4 million or 52 cents a share, up from $1.7 million, or 13 cents a share in the first quarter of 2004. This beats analysts' average estimate of 50 cents a share, according to Thomson First Call. Shares rose $2.48, or 9.05%, to $29.82.

On the corporate finance front,

Cheniere Energy's

(LNG) - Get Report

attempt to raise $500 million in junk bonds in a private sale failed this week because "the coupon price was too high," said a J.P. Morgan high yield analyst. The liquefied natural gas company "was hoping to get the money before they begin the new LNG terminal, but the truth is they really don't need the money that bad now," the analyst said. Shares dropped 49 cents, or 1.48%, to $32.57.

Remington Oil and Gas

(REM) - Get Report

, which explores and produces oil and gas, was raised to outperform by analyst Subash Chandra at Morgan Keegan. In 2004, the company delivered "league-leading performance in terms of reserve growth, production growth and finding and development costs," Chandra said in a note. Shares jumped $1.78, or 6.22%, to $30.41.

Shares of major oil producers were trading lower.

Exxon Mobil

(XOM) - Get Report

fell $1.11, or 1.89%, to $57.52;

ChevronTexaco

(CVX) - Get Report

dropped 84 cents, or 01.57%, to $52.50;

Royal Dutch/Shell

(RD)

fell $1.15, or 1.91%, to $58.98; ConocoPhillips decreased 59 cents, or 0.56%, to $103.96; and

BP

(BP) - Get Report

dropped $1.13, or 1.85%, to $60.02.